Hedge Fund Darlings vs. TD Ameritrade Holding Corporation (AMTD) In 2019

Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ complex research processes to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we pay special attention to the hedge fund activity in the small-cap space. Nevertheless, it is also possible to find underpriced large-cap stocks by following the hedge funds’ moves. In this article, we look at what those funds think of TD Ameritrade Holding Corp. (NYSE:AMTD) based on that data.

TD Ameritrade Holding Corporation (NYSE:AMTD) was in 29 hedge funds’ portfolios at the end of September. AMTD shareholders have witnessed an increase in enthusiasm from smart money in recent months. There were 22 hedge funds in our database with AMTD holdings at the end of the previous quarter. Our calculations also showed that AMTD isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.


Israel Englander of Millennium Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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 is still extremely cheap despite already gaining 20 percent. Keeping this in mind we’re going to take a peek at the latest hedge fund action surrounding TD Ameritrade Holding Corporation (NYSE:AMTD).

Hedge fund activity in TD Ameritrade Holding Corporation (NYSE:AMTD)

At Q3’s end, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of 32% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in AMTD over the last 17 quarters. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

More specifically, Renaissance Technologies was the largest shareholder of TD Ameritrade Holding Corporation (NYSE:AMTD), with a stake worth $120.3 million reported as of the end of September. Trailing Renaissance Technologies was Arrowstreet Capital, which amassed a stake valued at $59.6 million. LMR Partners, Crescent Park Management, and Millennium Management 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 Crescent Park Management allocated the biggest weight to TD Ameritrade Holding Corporation (NYSE:AMTD), around 7.36% of its 13F portfolio. Prana Capital Management is also relatively very bullish on the stock, earmarking 2.1 percent of its 13F equity portfolio to AMTD.

Consequently, specific money managers have jumped into TD Ameritrade Holding Corporation (NYSE:AMTD) headfirst. Prana Capital Management, managed by Peter Seuss, assembled the most valuable position in TD Ameritrade Holding Corporation (NYSE:AMTD). Prana Capital Management had $11.7 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also initiated a $3.2 million position during the quarter. The other funds with brand new AMTD positions are Michael Gelband’s ExodusPoint Capital, Karim Abbadi and Edward McBride’s Centiva Capital, and Donald Sussman’s Paloma Partners.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as TD Ameritrade Holding Corporation (NYSE:AMTD) but similarly valued. These stocks are Fiat Chrysler Automobiles NV (NYSE:FCAU), KLA Corporation (NASDAQ:KLAC), McKesson Corporation (NYSE:MCK), and Sprint Corporation (NYSE:S). All of these stocks’ market caps resemble AMTD’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FCAU 27 1493339 -1
KLAC 28 784370 4
MCK 39 1982389 3
S 23 885703 -2
Average 29.25 1286450 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.25 hedge funds with bullish positions and the average amount invested in these stocks was $1286 million. That figure was $334 million in AMTD’s case. McKesson Corporation (NYSE:MCK) is the most popular stock in this table. On the other hand Sprint Corporation (NYSE:S) is the least popular one with only 23 bullish hedge fund positions. TD Ameritrade Holding Corporation (NYSE:AMTD) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately AMTD wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); AMTD investors were disappointed as the stock returned 4.1% in 2019 and trailed 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 65 percent of these stocks already outperformed the market in 2019.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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