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 817 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 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 TMHC a good stock to buy now? Investors who are in the know were in an optimistic mood. The number of long hedge fund bets moved up by 2 in recent months. Taylor Morrison Home Corp (NYSE:TMHC) was in 35 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 33. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that TMHC 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 33 hedge funds in our database with TMHC holdings at the end of June. Video: 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 monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 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.
Clint Carlson of Carlson Capital
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 recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Keeping this in mind we're going to take a gander at the recent hedge fund action encompassing Taylor Morrison Home Corp (NYSE:TMHC).
Do Hedge Funds Think TMHC Is A Good Stock To Buy Now?
At Q3's end, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from one quarter earlier. On the other hand, there were a total of 27 hedge funds with a bullish position in TMHC a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
More specifically, Miller Value Partners was the largest shareholder of Taylor Morrison Home Corp (NYSE:TMHC), with a stake worth $84.1 million reported as of the end of September. Trailing Miller Value Partners was Basswood Capital, which amassed a stake valued at $42.7 million. Capital Growth Management, Dendur Capital, and Polar 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 Dendur Capital allocated the biggest weight to Taylor Morrison Home Corp (NYSE:TMHC), around 9.64% of its 13F portfolio. Basswood Capital is also relatively very bullish on the stock, setting aside 3.55 percent of its 13F equity portfolio to TMHC.
As industrywide interest jumped, specific money managers were breaking ground themselves. Carlson Capital, managed by Clint Carlson, established the most valuable position in Taylor Morrison Home Corp (NYSE:TMHC). Carlson Capital had $8 million invested in the company at the end of the quarter. George McCabe's Portolan Capital Management also initiated a $7.9 million position during the quarter. The other funds with brand new TMHC positions are Renaissance Technologies, Lee Ainslie's Maverick Capital, and Paul Tudor Jones's Tudor Investment Corp.
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. We will take a look at Western Alliance Bancorporation (NYSE:WAL), WNS (Holdings) Limited (NYSE:WNS), Goosehead Insurance, Inc. (NASDAQ:GSHD), Affiliated Managers Group, Inc. (NYSE:AMG), KBR, Inc. (NYSE:KBR), Portland General Electric Company (NYSE:POR), and SAGE Therapeutics Inc (NASDAQ:SAGE). This group of stocks' market valuations match TMHC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WAL,28,125862,4 WNS,21,265140,1 GSHD,22,142736,7 AMG,23,312850,-4 KBR,38,625767,3 POR,24,178843,3 SAGE,34,716348,4 Average,27.1,338221,2.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.1 hedge funds with bullish positions and the average amount invested in these stocks was $338 million. That figure was $312 million in TMHC's case. KBR, Inc. (NYSE:KBR) is the most popular stock in this table. On the other hand WNS (Holdings) Limited (NYSE:WNS) is the least popular one with only 21 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 78.2. 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 gained 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on TMHC as the stock returned 11.9% since the end of Q3 (through 12/18) 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.