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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 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of more than 8 percentage points so far in 2019. 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 Teekay Corporation (NYSE:TK).
Teekay Corporation (NYSE:TK) investors should pay attention to a decrease in activity from the world's largest hedge funds of late. TK was in 8 hedge funds' portfolios at the end of the third quarter of 2019. There were 13 hedge funds in our database with TK positions at the end of the previous quarter. Our calculations also showed that TK 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
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Jim Simons of Renaissance Technologies[/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 take a peek at the latest hedge fund action surrounding Teekay Corporation (NYSE:TK).
Hedge fund activity in Teekay Corporation (NYSE:TK)
Heading into the fourth quarter of 2019, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -38% from the second quarter of 2019. By comparison, 12 hedge funds held shares or bullish call options in TK a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Teekay Corporation (NYSE:TK) was held by Renaissance Technologies, which reported holding $7.6 million worth of stock at the end of September. It was followed by Cobalt Capital Management with a $7.4 million position. Other investors bullish on the company included Orbis Investment Management, Dalton Investments, and PEAK6 Capital Management. In terms of the portfolio weights assigned to each position Cobalt Capital Management allocated the biggest weight to Teekay Corporation (NYSE:TK), around 2.93% of its 13F portfolio. Dalton Investments is also relatively very bullish on the stock, designating 0.4 percent of its 13F equity portfolio to TK.
Due to the fact that Teekay Corporation (NYSE:TK) has witnessed declining sentiment from the smart money, logic holds that there exists a select few hedgies that slashed their positions entirely by the end of the third quarter. It's worth mentioning that Paul Marshall and Ian Wace's Marshall Wace said goodbye to the biggest investment of the 750 funds followed by Insider Monkey, worth about $0.5 million in stock, and John Overdeck and David Siegel's Two Sigma Advisors was right behind this move, as the fund cut about $0.5 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 5 funds by the end of the third quarter.
Let's now review hedge fund activity in other stocks similar to Teekay Corporation (NYSE:TK). We will take a look at Zix Corporation (NASDAQ:ZIXI), Summit Midstream Partners LP (NYSE:SMLP), Sprague Resources LP (NYSE:SRLP), and Legacy Housing Corporation (NASDAQ:LEGH). This group of stocks' market caps are closest to TK's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ZIXI,19,67786,5 SMLP,1,78,-3 SRLP,1,1076,-1 LEGH,4,5577,1 Average,6.25,18629,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.25 hedge funds with bullish positions and the average amount invested in these stocks was $19 million. That figure was $23 million in TK's case. Zix Corporation (NASDAQ:ZIXI) is the most popular stock in this table. On the other hand Summit Midstream Partners LP (NYSE:SMLP) is the least popular one with only 1 bullish hedge fund positions. Teekay Corporation (NYSE:TK) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on TK as the stock returned 20.3% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.