We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Peltz's recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Cousins Properties Incorporated (NYSE:CUZ).
Cousins Properties Incorporated (NYSE:CUZ) was in 18 hedge funds' portfolios at the end of the third quarter of 2019. CUZ investors should be aware of a decrease in activity from the world's largest hedge funds recently. There were 22 hedge funds in our database with CUZ holdings at the end of the previous quarter. Our calculations also showed that CUZ isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
[caption id="attachment_747404" align="aligncenter" width="473"] Stuart Zimmer of Zimmer Partners[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. We're going to view the key hedge fund action surrounding Cousins Properties Incorporated (NYSE:CUZ).
What have hedge funds been doing with Cousins Properties Incorporated (NYSE:CUZ)?
Heading into the fourth quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -18% from the previous quarter. On the other hand, there were a total of 14 hedge funds with a bullish position in CUZ a year ago. With hedgies' sentiment swirling, there exists a few key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
More specifically, Zimmer Partners was the largest shareholder of Cousins Properties Incorporated (NYSE:CUZ), with a stake worth $116.3 million reported as of the end of September. Trailing Zimmer Partners was Millennium Management, which amassed a stake valued at $30.2 million. GLG Partners, AWH Capital, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position AWH Capital allocated the biggest weight to Cousins Properties Incorporated (NYSE:CUZ), around 8.78% of its 13F portfolio. Zimmer Partners is also relatively very bullish on the stock, designating 1.27 percent of its 13F equity portfolio to CUZ.
Since Cousins Properties Incorporated (NYSE:CUZ) has faced a decline in interest from the entirety of the hedge funds we track, we can see that there was a specific group of fund managers that elected to cut their positions entirely heading into Q4. It's worth mentioning that Renaissance Technologies cut the biggest stake of all the hedgies tracked by Insider Monkey, comprising about $50.5 million in stock, and Jeffrey Hinkle's Shoals Capital Management was right behind this move, as the fund said goodbye to about $11.9 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 4 funds heading into Q4.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Cousins Properties Incorporated (NYSE:CUZ) but similarly valued. These stocks are Jefferies Financial Group Inc. (NYSE:JEF), Synovus Financial Corp. (NYSE:SNV), Syneos Health, Inc. (NASDAQ:SYNH), and Zynga Inc (NASDAQ:ZNGA). This group of stocks' market valuations match CUZ's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JEF,31,627544,-3 SNV,36,461625,0 SYNH,20,211629,0 ZNGA,39,1138358,-9 Average,31.5,609789,-3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.5 hedge funds with bullish positions and the average amount invested in these stocks was $610 million. That figure was $185 million in CUZ's case. Zynga Inc (NASDAQ:ZNGA) is the most popular stock in this table. On the other hand Syneos Health, Inc. (NASDAQ:SYNH) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks Cousins Properties Incorporated (NYSE:CUZ) is even less popular than SYNH. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on CUZ, though not to the same extent, as the stock returned 8.6% during the fourth quarter (through 11/30) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.