Do Hedge Funds Love THL Credit, Inc. (TCRD)?

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like THL Credit, Inc. (NASDAQ:TCRD).

THL Credit, Inc. (NASDAQ:TCRD) was in 6 hedge funds’ portfolios at the end of the third quarter of 2019. TCRD investors should be aware of an increase in enthusiasm from smart money of late. There were 5 hedge funds in our database with TCRD holdings at the end of the previous quarter. Our calculations also showed that TCRD isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most investors, hedge funds are assumed to be worthless, outdated investment vehicles of the past. While there are greater than 8000 funds with their doors open at the moment, Our experts look at the moguls of this group, approximately 750 funds. These hedge fund managers preside over most of the hedge fund industry’s total capital, and by keeping an eye on their top equity investments, Insider Monkey has revealed numerous investment strategies that have historically defeated Mr. Market. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points a year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .


Leon Cooperman of Omega Advisors

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting

he stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind let’s go over the new hedge fund action encompassing THL Credit, Inc. (NASDAQ:TCRD).

Hedge fund activity in THL Credit, Inc. (NASDAQ:TCRD)

At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from the previous quarter. By comparison, 5 hedge funds held shares or bullish call options in TCRD a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is TCRD A Good Stock To Buy?

More specifically, Omega Advisors was the largest shareholder of THL Credit, Inc. (NASDAQ:TCRD), with a stake worth $19.4 million reported as of the end of September. Trailing Omega Advisors was Arrowstreet Capital, which amassed a stake valued at $3.2 million. Two Sigma Advisors, D E Shaw, and Paloma Partners 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 Omega Advisors allocated the biggest weight to THL Credit, Inc. (NASDAQ:TCRD), around 1.15% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, earmarking 0.02 percent of its 13F equity portfolio to TCRD.

Consequently, key money managers have jumped into THL Credit, Inc. (NASDAQ:TCRD) headfirst. Paloma Partners, managed by Donald Sussman, initiated the most outsized position in THL Credit, Inc. (NASDAQ:TCRD). Paloma Partners had $0.5 million invested in the company at the end of the quarter.

Let’s also examine hedge fund activity in other stocks similar to THL Credit, Inc. (NASDAQ:TCRD). We will take a look at RTI Surgical Inc. (NASDAQ:RTIX), DHI Group Inc. (NYSE:DHX), Maui Land & Pineapple Co. (NYSE:MLP), and Geospace Technologies Corp (NASDAQ:GEOS). This group of stocks’ market valuations are similar to TCRD’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RTIX 14 24907 2
DHX 17 57742 1
MLP 2 6750 0
GEOS 6 10404 0
Average 9.75 24951 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $25 million. That figure was $25 million in TCRD’s case. DHI Group Inc. (NYSE:DHX) is the most popular stock in this table. On the other hand Maui Land & Pineapple Co. (NYSE:MLP) is the least popular one with only 2 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately TCRD wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); TCRD investors were disappointed as the stock returned 0.4% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.

Disclosure: None. This article was originally published at Insider Monkey.