Here is What Hedge Funds Think About THL Credit, Inc. (TCRD)

Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.

In this article, we’ll see whether THL Credit, Inc. (NASDAQ:TCRD) represents a good investment, based on the hedge fund sentiment towards it. Overall, the stock registered  a decrease in support from the money managers tracked by Insider Monkey. At the end of this article we will also compare TCRD to other stocks including Del Frisco’s Restaurant Group Inc (NASDAQ:DFRG), Homeowners Choice Inc (NYSE:HCI), and Emerge Energy Services LP (NYSE:EMES) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

With all of this in mind, we’re going to take a gander at the new action encompassing THL Credit, Inc. (NASDAQ:TCRD).

How have hedgies been trading THL Credit, Inc. (NASDAQ:TCRD)?

Heading into the fourth quarter of 2016, a total of seven of the hedge funds tracked by Insider Monkey were bullish on this stock, compared to nine funds a quarter earlier. The graph below displays the number of hedge funds with bullish position in TCRD over the last five quarters. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Omega Advisors, led by Leon Cooperman, holds the most valuable position in THL Credit, Inc. (NASDAQ:TCRD). Omega Advisors has a $3.3 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Two Sigma Advisors, led by John Overdeck and David Siegel, holding a $1.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other professional money managers with similar optimism contain Israel Englander’s Millennium Management, one of the biggest hedge funds in the world, Bruce Silver’s Silver Capital Management LLC and D. E. Shaw’s D E Shaw. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Seeing as THL Credit, Inc. (NASDAQ:TCRD) has encountered falling interest from the smart money, we can see that there were a few hedge funds that decided to sell off their entire stakes in the third quarter. Interestingly, Robert B. Gillam’s McKinley Capital Management said goodbye to the biggest position of the “upper crust” of funds studied by Insider Monkey, worth an estimated $2.3 million in stock, and John Fichthorn’s Dialectic Capital Management was right behind this move, as the fund cut about $0.1 million worth of shares.

Let’s now take a look at hedge fund activity in other stocks similar to THL Credit, Inc. (NASDAQ:TCRD). We will take a look at Del Frisco’s Restaurant Group Inc (NASDAQ:DFRG), Homeowners Choice Inc (NYSE:HCI), Emerge Energy Services LP (NYSE:EMES), and Potbelly Corp (NASDAQ:PBPB). All of these stocks’ market caps are closest to TCRD’s market cap.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $37 million. That figure was $8 million in TCRD’s case. Del Frisco’s Restaurant Group Inc (NASDAQ:DFRG) is the most popular stock in this table. On the other hand Emerge Energy Services LP (NYSE:EMES) is the least popular one with only four 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 DFRG might be a better candidate to consider taking a long position in.

Disclosure: none