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We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional 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. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Cousins Properties Incorporated (NYSE:CUZ) and determine whether hedge funds skillfully traded this stock.
Cousins Properties Incorporated (NYSE:CUZ) was in 22 hedge funds' portfolios at the end of the first quarter of 2020. CUZ has experienced an increase in enthusiasm from smart money recently. There were 12 hedge funds in our database with CUZ positions 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 Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 58 percentage points since March 2017 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Paul Tudor Jones of Tudor Investment Corp
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like "the Starbucks of cannabis" to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. Keeping this in mind let's take a look at the new hedge fund action surrounding Cousins Properties Incorporated (NYSE:CUZ).
What have hedge funds been doing with Cousins Properties Incorporated (NYSE:CUZ)?
At Q1's end, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 83% from the previous quarter. On the other hand, there were a total of 22 hedge funds with a bullish position in CUZ a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Millennium Management held the most valuable stake in Cousins Properties Incorporated (NYSE:CUZ), which was worth $20.7 million at the end of the third quarter. On the second spot was Long Pond Capital which amassed $17.8 million worth of shares. Balyasny Asset Management, Citadel Investment Group, and Gillson Capital 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 Hill Winds Capital allocated the biggest weight to Cousins Properties Incorporated (NYSE:CUZ), around 6.28% of its 13F portfolio. Gillson Capital is also relatively very bullish on the stock, earmarking 1.13 percent of its 13F equity portfolio to CUZ.
As industrywide interest jumped, key hedge funds have jumped into Cousins Properties Incorporated (NYSE:CUZ) headfirst. Long Pond Capital, managed by John Khoury, assembled the most outsized position in Cousins Properties Incorporated (NYSE:CUZ). Long Pond Capital had $17.8 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also made a $11.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Daniel Johnson's Gillson Capital, Paul Tudor Jones's Tudor Investment Corp, and Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors.
Let's check out hedge fund activity in other stocks similar to Cousins Properties Incorporated (NYSE:CUZ). We will take a look at Signature Bank (NASDAQ:SBNY), JBG SMITH Properties (NYSE:JBGS), Portland General Electric Company (NYSE:POR), and FLIR Systems, Inc. (NASDAQ:FLIR). This group of stocks' market valuations resemble CUZ's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SBNY,19,262247,-2 JBGS,20,318961,1 POR,23,247138,-4 FLIR,34,193470,2 Average,24,255454,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $255 million. That figure was $77 million in CUZ's case. FLIR Systems, Inc. (NASDAQ:FLIR) is the most popular stock in this table. On the other hand Signature Bank (NASDAQ:SBNY) is the least popular one with only 19 bullish hedge fund positions. Cousins Properties Incorporated (NYSE:CUZ) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and surpassed the market by 15.5 percentage points. Unfortunately CUZ wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); CUZ investors were disappointed as the stock returned 3% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.