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Is Taubman Centers, Inc. (TCO) A Good Stock To Buy ?

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren’t usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index’s returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you’d fail to beat the market. At the same time, the 15 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated a return of 19.7% during the first 2.5 months of 2019 (vs. 13.1% gain for SPY), with 93% of these stocks outperforming the benchmark. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Taubman Centers, Inc. (NYSE:TCO).

Taubman Centers, Inc. (NYSE:TCO) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 20 hedge funds’ portfolios at the end of December. At the end of this article we will also compare TCO to other stocks including Manhattan Associates, Inc. (NASDAQ:MANH), Clean Harbors Inc (NYSE:CLH), and Verint Systems Inc. (NASDAQ:VRNT) to get a better sense of its popularity.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Dmitry Balyasny

We’re going to take a look at the latest hedge fund action encompassing Taubman Centers, Inc. (NYSE:TCO).

How are hedge funds trading Taubman Centers, Inc. (NYSE:TCO)?

Heading into the first quarter of 2019, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards TCO over the last 14 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

TCO_apr2019

Among these funds, Land & Buildings Investment Management held the most valuable stake in Taubman Centers, Inc. (NYSE:TCO), which was worth $50.7 million at the end of the third quarter. On the second spot was AEW Capital Management which amassed $33.3 million worth of shares. Moreover, Renaissance Technologies, Balyasny Asset Management, and GLG Partners were also bullish on Taubman Centers, Inc. (NYSE:TCO), allocating a large percentage of their portfolios to this stock.

Since Taubman Centers, Inc. (NYSE:TCO) has witnessed a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of hedge funds who were dropping their entire stakes last quarter. Intriguingly, Josh Donfeld and David Rogers’s Castle Hook Partners cut the largest investment of the “upper crust” of funds followed by Insider Monkey, worth an estimated $37 million in stock. John Khoury’s fund, Long Pond Capital, also cut its stock, about $25.8 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Taubman Centers, Inc. (NYSE:TCO) but similarly valued. We will take a look at Manhattan Associates, Inc. (NASDAQ:MANH), Clean Harbors Inc (NYSE:CLH), Verint Systems Inc. (NASDAQ:VRNT), and Aerojet Rocketdyne Holdings Inc (NYSE:AJRD). This group of stocks’ market caps are closest to TCO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MANH 20 240659 -3
CLH 23 235723 5
VRNT 18 242649 0
AJRD 19 391598 0
Average 20 277657 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $278 million. That figure was $171 million in TCO’s case. Clean Harbors Inc (NYSE:CLH) is the most popular stock in this table. On the other hand Verint Systems Inc. (NASDAQ:VRNT) is the least popular one with only 18 bullish hedge fund positions. Taubman Centers, Inc. (NYSE:TCO) 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. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately TCO wasn’t nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); TCO investors were disappointed as the stock returned 11.5% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.

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

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