Hedge Funds Aren’t Crazy About THL Credit, Inc. (TCRD) Anymore

Based on the fact that hedge funds have collectively under-performed the market for several years, it would be easy to assume that their stock picks simply aren’t very good. However, our research shows this not to be the case. In fact, when it comes to their very top picks collectively, they show a strong ability to pick winning stocks. Between November 1, 2014 and October 30 of this year, less than 49% of the stocks in the S&P 500 beat the market. However, hedge funds’ top 30 stock picks from the index had a much higher success rate than this, at 63%. The returns from these 30 stocks also easily bested the broader market, at 9.5% compared to 5.2%, despite there being a few duds in there like Micron and Anadarko (even their collective wisdom isn’t perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.

Is THL Credit, Inc. (NASDAQ:TCRD) a sound investment today? Amid volatile trading since the beginning of the year and a 6% drop in the third quarter alone prominent investors are in a pessimistic mood. Nevertheless, let’s take a closer look at the hedge fund activity surrounding the stock, lately. Moreover, since The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Corindus Vascular Robotics Inc (NYSEMKT:CVRS), Weight Watchers International, Inc. (NYSE:WTW), and Fifth Street Asset Management Inc (NASDAQ:FSAM) to gather more data points.

In the 21st century investor’s toolkit there are a large number of signals stock traders employ to appraise their stock investments. Two of the best signals are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the best picks of the elite money managers can outpace their index-focused peers by a healthy margin (see the details here).

Now, we’re going to check out the recent action encompassing THL Credit, Inc. (NASDAQ:TCRD).

What have hedge funds been doing with THL Credit, Inc. (NASDAQ:TCRD)?

Heading into Q4, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a drop of 22% from one quarter earlier. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who have amassed substantial positions.

According to Insider Monkey’s hedge fund database, Omega Advisors, managed by Leon Cooperman, holds the number one position in THL Credit, Inc. (NASDAQ:TCRD), holding $6.6 million in the stock. The second largest stake is held by Israel Englander’s Millennium Management, with a $2.4 million position. Other members of the smart money with similar optimism include John Fichthorn’s Dialectic Capital Management, Robert B. Gillam’s McKinley Capital Management, and John Overdeck and David Siegel’s Two Sigma Advisors.

Seeing as THL Credit, Inc. (NASDAQ:TCRD) has faced a declining sentiment from the entirety of the hedge funds we track, logic holds that there exists a select few funds who were dropping their entire stakes by the end of the third quarter. At the top of the heap, Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital cut the largest investment of the 700 funds tracked by Insider Monkey, valued at about $0.2 million in stock. Bruce Silver’s fund, Silver Capital Management LLC, also dropped its stock, about $0.1 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 2 funds by the end of the third quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as THL Credit, Inc. (NASDAQ:TCRD) but similarly valued. We will take a look at Corindus Vascular Robotics Inc (NYSEMKT:CVRS), Weight Watchers International, Inc. (NYSE:WTW), Fifth Street Asset Management Inc (NASDAQ:FSAM), and Columbus McKinnon Corp. (NASDAQ:CMCO). All of these stocks’ market caps are similar to TCRD’s market cap.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $41 million, which is considerably higher in comparison to the $14 million in TCRD’s case. Weight Watchers International, Inc. (NYSE:WTW) is the most popular stock in this table, while Corindus Vascular Robotics Inc (NYSEMKT:CVRS) is the least popular one with only 4 bullish hedge fund positions. THL Credit, Inc. (NASDAQ:TCRD) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard WTW might be a better candidate to consider a long position.