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

Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients’ money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth also depends on it. Regardless of the various methods used by elite investors like David Tepper and David Abrams, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space.

Taubman Centers, Inc. (NYSE:TCO) shareholders have witnessed a decrease in activity from the world’s largest hedge funds recently. TCO was in 14 hedge funds’ portfolios at the end of the first quarter of 2019. There were 20 hedge funds in our database with TCO positions at the end of the previous quarter. Our calculations also showed that TCO isn’t among the 30 most popular stocks among hedge funds.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Dmitry Balyasny

We’re going to analyze the new hedge fund action surrounding Taubman Centers, Inc. (NYSE:TCO).

What have hedge funds been doing with Taubman Centers, Inc. (NYSE:TCO)?

At Q1’s end, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of -30% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards TCO over the last 15 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

TCO_jun2019

Among these funds, Land & Buildings Investment Management held the most valuable stake in Taubman Centers, Inc. (NYSE:TCO), which was worth $59 million at the end of the first quarter. On the second spot was AEW Capital Management which amassed $37.5 million worth of shares. Moreover, Balyasny Asset Management, GLG Partners, and Winton Capital Management were also bullish on Taubman Centers, Inc. (NYSE:TCO), allocating a large percentage of their portfolios to this stock.

Judging by the fact that Taubman Centers, Inc. (NYSE:TCO) has experienced bearish sentiment from the smart money, we can see that there were a few money managers that slashed their entire stakes last quarter. At the top of the heap, Jeffrey Pierce’s Snow Park Capital Partners sold off the biggest stake of all the hedgies monitored by Insider Monkey, worth about $3.2 million in stock. D. E. Shaw’s fund, D E Shaw, also said goodbye to its stock, about $2.3 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 6 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to Taubman Centers, Inc. (NYSE:TCO). We will take a look at Qualys Inc (NASDAQ:QLYS), Allegheny Technologies Incorporated (NYSE:ATI), AutoNation, Inc. (NYSE:AN), and Wolverine World Wide, Inc. (NYSE:WWW). This group of stocks’ market caps match TCO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
QLYS 14 144956 -3
ATI 25 209165 1
AN 21 458504 -1
WWW 19 124564 7
Average 19.75 234297 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $234 million. That figure was $205 million in TCO’s case. Allegheny Technologies Incorporated (NYSE:ATI) is the most popular stock in this table. On the other hand Qualys Inc (NASDAQ:QLYS) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Taubman Centers, Inc. (NYSE:TCO) is even less popular than QLYS. Hedge funds dodged a bullet by taking a bearish stance towards TCO. Our calculations showed that the top 20 most popular hedge fund stocks returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately TCO wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); TCO investors were disappointed as the stock returned -16% during the same time frame and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in the second quarter.

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

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