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Taylor Morrison Home Corp (TMHC): Are Hedge Funds Right About This Stock?

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The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 873 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their June 30th holdings, data that is available nowhere else. Should you consider Taylor Morrison Home Corp (NYSE:TMHC) for your portfolio? We'll look to this invaluable collective wisdom for the answer.

Is Taylor Morrison Home Corp (NYSE:TMHC) a buy here? The best stock pickers were betting on the stock. The number of long hedge fund positions rose by 1 in recent months. Taylor Morrison Home Corp (NYSE:TMHC) was in 23 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 35. Our calculations also showed that TMHC isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. 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 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.

Bill Miller
Bill Miller

Bill Miller of Miller Value Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now we're going to analyze the fresh hedge fund action regarding Taylor Morrison Home Corp (NYSE:TMHC).

Do Hedge Funds Think TMHC Is A Good Stock To Buy Now?

At the end of the second quarter, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards TMHC over the last 24 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Miller Value Partners held the most valuable stake in Taylor Morrison Home Corp (NYSE:TMHC), which was worth $77.4 million at the end of the second quarter. On the second spot was Basswood Capital which amassed $44.2 million worth of shares. AQR Capital Management, Polar Capital, and Balyasny Asset Management 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 Basswood Capital allocated the biggest weight to Taylor Morrison Home Corp (NYSE:TMHC), around 1.85% of its 13F portfolio. Miller Value Partners is also relatively very bullish on the stock, setting aside 1.84 percent of its 13F equity portfolio to TMHC.

Consequently, specific money managers have jumped into Taylor Morrison Home Corp (NYSE:TMHC) headfirst. ExodusPoint Capital, managed by Michael Gelband, assembled the largest position in Taylor Morrison Home Corp (NYSE:TMHC). ExodusPoint Capital had $0.6 million invested in the company at the end of the quarter. Benjamin A. Smith's Laurion Capital Management also initiated a $0.5 million position during the quarter. The other funds with brand new TMHC positions are Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors, Jinghua Yan's TwinBeech Capital, and Greg Eisner's Engineers Gate Manager.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Taylor Morrison Home Corp (NYSE:TMHC) but similarly valued. These stocks are Bank of Hawaii Corporation (NYSE:BOH), Haemonetics Corporation (NYSE:HAE), Turquoise Hill Resources Ltd (NYSE:TRQ), Agios Pharmaceuticals Inc (NASDAQ:AGIO), Visteon Corp (NASDAQ:VC), Relay Therapeutics, Inc. (NASDAQ:RLAY), and Emergent Biosolutions Inc (NYSE:EBS). This group of stocks' market caps resemble TMHC's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BOH,15,42233,0 HAE,30,392886,-7 TRQ,11,620309,-2 AGIO,19,408165,-3 VC,20,175914,0 RLAY,17,658614,-3 EBS,15,124614,2 Average,18.1,346105,-1.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.1 hedge funds with bullish positions and the average amount invested in these stocks was $346 million. That figure was $203 million in TMHC's case. Haemonetics Corporation (NYSE:HAE) is the most popular stock in this table. On the other hand Turquoise Hill Resources Ltd (NYSE:TRQ) is the least popular one with only 11 bullish hedge fund positions. Taylor Morrison Home Corp (NYSE:TMHC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TMHC is 57.3. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on TMHC as the stock returned 5.5% since the end of Q2 (through 10/22) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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