Hedge Funds Are Dumping Taylor Morrison Home Corp (TMHC)

The Insider Monkey team has completed processing the quarterly 13F filings for the March quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Taylor Morrison Home Corp (NYSE:TMHC).

Is Taylor Morrison Home Corp (NYSE:TMHC) a buy right now? The smart money was reducing their bets on the stock. The number of long hedge fund positions shrunk by 11 in recent months. Taylor Morrison Home Corp (NYSE:TMHC) was in 22 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 35. Our calculations also showed that TMHC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In the financial world there are a large number of metrics investors use to evaluate stocks. A pair of the most innovative metrics are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the elite fund managers can outpace the S&P 500 by a solid margin (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Bill Miller

Bill Miller of Miller Value Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to view the fresh hedge fund action encompassing Taylor Morrison Home Corp (NYSE:TMHC).

Do Hedge Funds Think TMHC Is A Good Stock To Buy Now?

At first quarter’s end, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -33% from the fourth quarter of 2020. By comparison, 28 hedge funds held shares or bullish call options in TMHC a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

The largest stake in Taylor Morrison Home Corp (NYSE:TMHC) was held by Miller Value Partners, which reported holding $95.8 million worth of stock at the end of December. It was followed by Basswood Capital with a $37 million position. Other investors bullish on the company included Polar Capital, Royce & Associates, and AQR Capital Management. In terms of the portfolio weights assigned to each position Miller Value Partners allocated the biggest weight to Taylor Morrison Home Corp (NYSE:TMHC), around 2.48% of its 13F portfolio. Basswood Capital is also relatively very bullish on the stock, dishing out 1.67 percent of its 13F equity portfolio to TMHC.

Since Taylor Morrison Home Corp (NYSE:TMHC) has experienced bearish sentiment from the smart money, we can see that there was a specific group of funds that elected to cut their full holdings in the first quarter. Intriguingly, Malcolm Levine’s Dendur Capital cut the biggest position of the 750 funds tracked by Insider Monkey, valued at close to $29.5 million in stock. Jeffrey Altman’s fund, Owl Creek Asset Management, also dropped its stock, about $7.6 million worth. These transactions are important to note, as total hedge fund interest dropped by 11 funds in the first quarter.

Let’s now review hedge fund activity in other stocks similar to Taylor Morrison Home Corp (NYSE:TMHC). We will take a look at Six Flags Entertainment Corp (NYSE:SIX), Mercury Systems Inc (NASDAQ:MRCY), MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI), W.R. Grace & Co. (NYSE:GRA), BigCommerce Holdings, Inc. (NASDAQ:BIGC), H&R Block, Inc. (NYSE:HRB), and Atotech Limited (NYSE:ATC). This group of stocks’ market caps are similar to TMHC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SIX 37 1036490 -4
MRCY 17 110986 7
MTSI 30 201129 6
GRA 43 1434037 3
BIGC 26 505108 0
HRB 27 228558 4
ATC 17 69894 17
Average 28.1 512315 4.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.1 hedge funds with bullish positions and the average amount invested in these stocks was $512 million. That figure was $218 million in TMHC’s case. W.R. Grace & Co. (NYSE:GRA) is the most popular stock in this table. On the other hand Mercury Systems Inc (NASDAQ:MRCY) is the least popular one with only 17 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. Our overall hedge fund sentiment score for TMHC is 22.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and surpassed the market again by 7.7 percentage points. Unfortunately TMHC wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); TMHC investors were disappointed as the stock returned -24.3% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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Disclosure: None. This article was originally published at Insider Monkey.