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The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Cousins Properties Incorporated (NYSE:CUZ) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.
Is Cousins Properties Incorporated (NYSE:CUZ) undervalued? Hedge funds were selling. The number of long hedge fund bets went down by 3 recently. Cousins Properties Incorporated (NYSE:CUZ) was in 19 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 22. Our calculations also showed that CUZ isn't among the 30 most popular stocks among hedge funds (click for Q2 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.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Stuart Zimmer of Zimmer Partners
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. 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. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keeping this in mind we're going to take a glance at the new hedge fund action encompassing Cousins Properties Incorporated (NYSE:CUZ).
What have hedge funds been doing with Cousins Properties Incorporated (NYSE:CUZ)?
Heading into the third quarter of 2020, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in CUZ over the last 20 quarters. With the smart money's capital changing hands, there exists an "upper tier" of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Citadel Investment Group, managed by Ken Griffin, holds the largest position in Cousins Properties Incorporated (NYSE:CUZ). Citadel Investment Group has a $49.8 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by Millennium Management, managed by Israel Englander, which holds a $30.1 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other professional money managers with similar optimism include Josh Donfeld and David Rogers's Castle Hook Partners, Daniel Johnson's Gillson Capital and Renaissance Technologies. In terms of the portfolio weights assigned to each position AWH Capital allocated the biggest weight to Cousins Properties Incorporated (NYSE:CUZ), around 1.96% of its 13F portfolio. Gillson Capital is also relatively very bullish on the stock, dishing out 1.64 percent of its 13F equity portfolio to CUZ.
Seeing as Cousins Properties Incorporated (NYSE:CUZ) has experienced a decline in interest from the smart money, we can see that there is a sect of hedgies that decided to sell off their positions entirely heading into Q3. At the top of the heap, John Khoury's Long Pond Capital sold off the largest investment of the "upper crust" of funds followed by Insider Monkey, comprising about $17.8 million in stock, and Dmitry Balyasny's Balyasny Asset Management was right behind this move, as the fund cut about $11.1 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 3 funds heading into Q3.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Cousins Properties Incorporated (NYSE:CUZ) but similarly valued. We will take a look at Agora, Inc. (NASDAQ:API), Legg Mason, Inc. (NYSE:LM), Ritchie Bros. Auctioneers (NYSE:RBA), Eaton Vance Corp (NYSE:EV), IDACORP Inc (NYSE:IDA), Parsley Energy Inc (NYSE:PE), and Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR). This group of stocks' market values resemble CUZ's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position API,29,159853,29 LM,30,1102060,-8 RBA,17,221281,3 EV,28,182257,8 IDA,22,250723,-2 PE,39,507552,-6 ARWR,21,235917,-1 Average,26.6,379949,3.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.6 hedge funds with bullish positions and the average amount invested in these stocks was $380 million. That figure was $116 million in CUZ's case. Parsley Energy Inc (NYSE:PE) is the most popular stock in this table. On the other hand Ritchie Bros. Auctioneers (NYSE:RBA) is the least popular one with only 17 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. Our overall hedge fund sentiment score for CUZ is 32.5. 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 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 24.8% in 2020 through the end of September and surpassed the market by 19.3 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 -3.2% in the third 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.