Cousins Properties [NYSE: CUZ] had announced on Friday that it was doing a stock-for-stock merger with TIER RIET, Inc. [NYSE: TIER]. This news saw CUZ gain by 305.41%, to close the week as one of the biggest gainers. This bullish surge saw it rise to $38.96, establishing a clear bull trend on the monthly chart. If it opens Monday trading with the same positive momentum, it could possibly trade in the green all through the day. This could partly be driven by fundamentals and merger-driven speculation.
Speculation could play a role as investors bet on the improved fundamentals now that this company has merged with TIER REIT to form a much bigger, better capitalized REIT.
From a purely fundamentals perspective, CUZ fundamentals already seem to be drawing in top hedge funds. In the last quarter, the number of hedge funds with long positions on CUZ rose by about 29%. Given that hedge funds fall under the category of smart money, it’s a strong indicator that they expect this stock to keep outperforming the market in the future. Some of the funds that have positions in CUZ include Millenium management, with a stake worth roughly $40.3 million and Renaissance Technologies, whose stake stands at about $37.4 million.
Looking at the company’s books, its not had to see why smart money is bullish on this stock. For starters, the company is making money, a factor that is key to value growth. It’s profit margins currently stand at about $19.57%, with an operating margin of 24.33%. This is an indicator that CUZ has a strong value proposition, and the market is responsive. These numbers are likely to remain strong, given that revenues are on a positive track. CUZ has a quarterly revenue growth (yoy) of about 13%.
The company’s management is also quite efficient in its utilization of resources, as seen in its return on equity. The company has a return on equity of about 3.54% in the real estate market. With a high ROE, growing revenues, and quarterly earnings growth (yoy) of about 120%, its not hard to see why smart money is bullish on this stock.
A combination of these factors – strong numbers, hedge funds and the merger – makes CUZ a stock many are watching. Make sure to watch the chart as it has seen a huge move recently and many would say this is a bit overextended short term.