Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed over the past few years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that hedge funds do have great stock picking skills, so let’s take a glance at the smart money sentiment towards Taylor Morrison Home Corp (NYSE:TMHC).
Is Taylor Morrison Home Corp (NYSE:TMHC) a healthy stock for your portfolio? The smart money is getting more optimistic. The number of bullish hedge fund positions rose by 2 in recent months. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as XPO Logistics Inc (NYSE:XPO), Convergys Corporation (NYSE:CVG), and F.N.B. Corp (NYSE:FNB) to gather more data points.
Follow Taylor Morrison Home Corp (NYSE:TMHC)
Follow Taylor Morrison Home Corp (NYSE:TMHC)
In the financial world there are dozens of methods stock traders employ to analyze stocks. A pair of the best methods are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the top picks of the elite money managers can outclass the market by a significant margin (see the details here).
With all of this in mind, let’s take a glance at the fresh action regarding Taylor Morrison Home Corp (NYSE:TMHC).
How have hedgies been trading Taylor Morrison Home Corp (NYSE:TMHC)?
At the Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 17% from the second quarter. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Alan Fournier’s Pennant Capital Management has the most valuable position in Taylor Morrison Home Corp (NYSE:TMHC), worth close to $42.4 million, comprising 0.9% of its total 13F portfolio. The second most bullish fund manager is Citadel Investment Group, managed by Ken Griffin, which holds an $31.5 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other professional money managers that are bullish comprise Brett Barakett’s Tremblant Capital, Ken Heebner’s Capital Growth Management and Bill Miller’s Legg Mason Capital Management.
As aggregate interest increased, specific money managers were breaking ground themselves. Covalent Capital Partners, managed by Robert Hockett, created the most valuable position in Taylor Morrison Home Corp (NYSE:TMHC). Covalent Capital Partners had $5.4 million invested in the company at the end of the quarter. Chao Ku’s Nine Chapters Capital Management also made an $2.2 million investment in the stock during the quarter. The following funds were also among the new TMHC investors: Michael Platt and William Reeves’s BlueCrest Capital Mgmt., Cliff Asness’s AQR Capital Management, and Paul Tudor Jones’s Tudor Investment Corp.
Let’s now take a look at hedge fund activity in other stocks similar to Taylor Morrison Home Corp (NYSE:TMHC). These stocks are XPO Logistics Inc (NYSE:XPO), Convergys Corporation (NYSE:CVG), F.N.B. Corp (NYSE:FNB), and Sunedison Inc (NYSE:SUNE). This group of stocks’ market values are closest to TMHC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| XPO | 46 | 866732 | 3 |
| CVG | 20 | 147888 | 2 |
| FNB | 12 | 57118 | 3 |
| SUNE | 73 | 1056855 | -20 |
As you can see these stocks had an average of 38 hedge funds with bullish positions and the average amount invested in these stocks was $532 million. That figure was just $132 million in TMHC’s case. Sunedison Inc (NYSE:SUNE) is the most popular stock in this table, while F.N.B. Corp (NYSE:FNB) is the least popular one with only 12 bullish hedge fund positions. Taylor Morrison Home Corp (NYSE:TMHC) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard SUNE might be a better candidate to consider a long position.
