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Is TCO A Good Stock To Buy According To Hedge Funds?

Asma UL Husna
·6 min read

At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Taubman Centers, Inc. (NYSE:TCO) makes for a good investment right now.

Is TCO a good stock to buy? The best stock pickers were taking a bearish view. The number of long hedge fund positions were cut by 4 in recent months. Taubman Centers, Inc. (NYSE:TCO) was in 36 hedge funds' portfolios at the end of September. The all time high for this statistic is 40. Our calculations also showed that TCO isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 40 hedge funds in our database with TCO holdings at the end of June.

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 66 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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

David Simon of Twin Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. Now let's take a look at the recent hedge fund action regarding Taubman Centers, Inc. (NYSE:TCO).

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

Heading into the fourth quarter of 2020, a total of 36 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TCO over the last 21 quarters. 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, Pentwater Capital Management held the most valuable stake in Taubman Centers, Inc. (NYSE:TCO), which was worth $166.8 million at the end of the third quarter. On the second spot was Alpine Associates which amassed $48.1 million worth of shares. TIG Advisors, D E Shaw, and Redwood Capital 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 Scoggin allocated the biggest weight to Taubman Centers, Inc. (NYSE:TCO), around 7.39% of its 13F portfolio. Litespeed Management is also relatively very bullish on the stock, earmarking 6.15 percent of its 13F equity portfolio to TCO.

Because Taubman Centers, Inc. (NYSE:TCO) has witnessed a decline in interest from the entirety of the hedge funds we track, it's safe to say that there was a specific group of hedge funds that elected to cut their full holdings by the end of the third quarter. It's worth mentioning that Parvinder Thiara's Athanor Capital said goodbye to the largest stake of the 750 funds watched by Insider Monkey, totaling close to $11.4 million in stock, and Florian Kronawitter's White Square Capital was right behind this move, as the fund dumped about $6.4 million worth. These moves are interesting, as total hedge fund interest fell by 4 funds by the end of the third quarter.

Let's now take a look at hedge fund activity in other stocks similar to Taubman Centers, Inc. (NYSE:TCO). We will take a look at Mr. Cooper Group Inc. (NASDAQ:COOP), EPR Properties (NYSE:EPR), SpringWorks Therapeutics, Inc. (NASDAQ:SWTX), SciPlay Corporation (NASDAQ:SCPL), Outset Medical, Inc. (NASDAQ:OM), Sterling Bancorp (NYSE:STL), and Graham Holdings Co (NYSE:GHC). This group of stocks' market caps are closest to TCO's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position COOP,23,416248,-1 EPR,24,327724,1 SWTX,16,847645,1 SCPL,27,128931,1 OM,27,586730,27 STL,25,210125,-2 GHC,24,309246,2 Average,23.7,403807,4.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.7 hedge funds with bullish positions and the average amount invested in these stocks was $404 million. That figure was $538 million in TCO's case. SciPlay Corporation (NASDAQ:SCPL) is the most popular stock in this table. On the other hand SpringWorks Therapeutics, Inc. (NASDAQ:SWTX) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Taubman Centers, Inc. (NYSE:TCO) is more popular among hedge funds. Our overall hedge fund sentiment score for TCO is 78. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 33.3% in 2020 through December 18th but still managed to beat the market by 16.4 percentage points. Hedge funds were also right about betting on TCO as the stock returned 28.9% since the end of September (through 12/18) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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