Is Teekay Corporation (TK) a good stock to buy?
An impressive number of 13F files filed with the United States Securities and Exchange Commission have been processed by Insider Monkey so that individual investors can examine the general sentiment of hedge funds towards the stocks included in their watch lists. These recently submitted public documents disclose the fund managers’ equity positions at the end of the three-month period that ended on June 30, so let’s move on to the discussion of hedge fund sentiment on Teekay Corporation (NYSE: TK ).
Is TK a good stock to buy? Teekay Corporation (NYSE: TK) investors should pay attention to a decrease in the activity of the world’s largest hedge funds recently. Teekay Corporation (NYSE: TK) was listed in 10 hedge fund portfolios at the end of June. The all-time high for this statistic is 19. Our calculations have also shown that TK is not in the top 30 most popular stocks among hedge funds (click for Q2 rank).
The reputation of hedge funds as savvy investors has been tarnished over the past decade, as their hedged returns could not keep up with the unhedged returns of stock indices. Our research has shown that small cap hedge fund stock selection managed to beat the market by double digits every year between 1999 and 2016, but the margin for outperformance has shrunk in recent years. Nonetheless, we were still able to identify in advance a select group of hedge funds that have outperformed S&P 500 ETFs by 79 percentage points since March 2017 (see details here). We were also able to identify in advance a select group of hedge funds that underperformed the market by 10 percentage points per year between 2006 and 2017. Interestingly, the margin of underperformance of these stocks has increased in recent years. Investors who are long in the market and short on these stocks would have reported more than 27% per year between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Michael Platt of BlueCrest Capital Mgmt.
At Insider Monkey, we scour multiple sources to uncover the next big investing idea. We go through lists like the top 10 electric vehicle stocks to pick the next Tesla that will deliver 10x yield. Even though we only recommend positions in a tiny fraction of the companies we analyze, we check as many stocks as possible. We read letters from hedge fund investors and listen to equity pitches at hedge fund conferences. You can sign up for our free daily newsletter on our homepage. Now let’s take a look at the new hedge fund action regarding Teekay Corporation (NYSE: TK).
Do hedge funds think TK is a good stock to buy now?
At the end of the second quarter, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -23% from the previous quarter. By comparison, 14 hedge funds held bullish stocks or call options in TK a year ago. With the change in the hands of hedge fund capital, there are a few key hedge fund managers who were significantly increasing their holdings (or already building up significant positions).
Specifically, Cobalt Capital Management was the largest shareholder in Teekay Corporation (NYSE: TK), with a $ 15 million stake reported in late June. Lagging behind Cobalt Capital Management was Renaissance Technologies, which raised a stake valued at $ 8.5 million. DE Shaw, Arrowstreet Capital, and Citadel Investment Group were also very fond of the stock, becoming one of the firm’s largest hedge fund holders. In terms of the portfolio weights assigned to each position, Cobalt Capital Management assigned the largest weight to Teekay Corporation (NYSE: TK), approximately 5.25% of its 13F portfolio. Qtron Investments is also relatively very bullish on the stock, distributing 0.01% of its 13F equity portfolio to TK.
Because Teekay Corporation (NYSE: TK) has faced a drop in interest from all of the hedge funds we track, it’s safe to say that there is a certain “level” of hedges that have decided to fully sell their positions in the second quarter. Interestingly, Israel Englander’s Millennium Management reduced the largest stake of the 750 funds tracked by Insider Monkey, totaling nearly $ 2.5 million in shares. Michael Gelband’s fund, ExodusPoint Capital, also bid farewell to its shares, valued at around $ 0.4 million. These bearish behaviors are interesting, as total hedge fund interest fell by 3 funds in the second quarter.
Now let’s take a look at the hedge fund activity in other stocks – not necessarily in the same industry as Teekay Corporation (NYSE: TK) but of similar value. We will be looking at Alexco Resource Corp. (NYSE: AXU), Target Hospitality Corp. (NASDAQ: TH), 89bio, Inc. (NASDAQ: ETNB), Primis Financial Corp. (NASDAQ: FRST), Identiv, Inc. (NASDAQ: INVE), Superior Group of Companies, Inc. (NASDAQ: SGC) and Farmland Partners Inc (NYSE: FPI). The market valuations of this group of shares are similar to the market valuation of TK.
[table] Ticker, number of HF with positions, total value of HF positions (x1000), change of HF position AXU, 3,220,0 TH, 14,71639,6 ETNB, 10,182205, -3 FRST, 9,19433,1 INVE, 7.65074.0 SGC, 7.6313, -2 FPI, 11.6373.6 Medium, 8.7.50180,1.1 [/table]
Check the table here if you have formatting issues.
As you can see, these stocks had an average of 8.7 hedge funds with bullish positions and the average amount invested in these stocks was $ 50 million. That figure was $ 28 million in the case of TK. Target Hospitality Corp. (NASDAQ: TH) is the most popular stock in this chart. On the other hand, Alexco Resource Corp. (NYSE: AXU) is the least popular with only 3 bullish hedge fund positions. Teekay Corporation (NYSE: TK) isn’t the most popular stock in this group, but hedge fund interest is still above average. Our overall hedge fund sentiment score for TK is 49.6. Stocks with a 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 positive signal, but we prefer to spend our time researching the stocks on which hedge funds are accumulating. Our calculations showed that the 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 25.7% in 2021 through September 27 and again beat the market by 6.2 percentage points. Unfortunately, TK was not as popular as these 5 stocks and the hedge funds betting on TK were disappointed as the stock has returned 0.3% since the end of June (through 9/27) and has under- performed the market. If you want to invest in large cap stocks with huge upside potential, you should check out the 5 most popular stocks among hedge funds, as many of these stocks have already outperformed the market since 2019.
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Disclosure: none. This article originally appeared on Insider Monkey.