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Hedge Funds Are Selling THL Credit, Inc. (TCRD)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of THL Credit, Inc. (NASDAQ:TCRD) based on that data.

Is THL Credit, Inc. (NASDAQ:TCRD) a great investment now? Hedge funds are becoming less hopeful. The number of long hedge fund positions decreased by 2 in recent months. Our calculations also showed that TCRD isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). TCRD was in 5 hedge funds’ portfolios at the end of the first quarter of 2020. There were 7 hedge funds in our database with TCRD holdings at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

At the moment there are tons of formulas investors have at their disposal to grade their stock investments. A pair of the less utilized formulas are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the top picks of the elite investment managers can trounce the broader indices by a superb margin (see the details here).

OMEGA ADVISORS

Leon Cooperman of Omega Advisors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a look at the latest hedge fund action surrounding THL Credit, Inc. (NASDAQ:TCRD).

What does smart money think about THL Credit, Inc. (NASDAQ:TCRD)?

At the end of the first quarter, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of -29% from the previous quarter. By comparison, 6 hedge funds held shares or bullish call options in TCRD a year ago. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

Is TCRD A Good Stock To Buy?

The largest stake in THL Credit, Inc. (NASDAQ:TCRD) was held by Omega Advisors, which reported holding $7.6 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $1.3 million position. Other investors bullish on the company included D E Shaw, Two Sigma Advisors, and Bulldog Investors. In terms of the portfolio weights assigned to each position Omega Advisors allocated the biggest weight to THL Credit, Inc. (NASDAQ:TCRD), around 0.98% of its 13F portfolio. Bulldog Investors is also relatively very bullish on the stock, dishing out 0.11 percent of its 13F equity portfolio to TCRD.

Seeing as THL Credit, Inc. (NASDAQ:TCRD) has faced a decline in interest from the aggregate hedge fund industry, logic holds that there was a specific group of hedgies that decided to sell off their positions entirely heading into Q4. At the top of the heap, Donald Sussman’s Paloma Partners sold off the largest position of the “upper crust” of funds followed by Insider Monkey, totaling close to $0.2 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund dropped about $0.1 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 2 funds heading into Q4.

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 Eloxx Pharmaceuticals, Inc. (NASDAQ:ELOX), Lightinthebox Holding Co Ltd-ADR (NYSE:LITB), Synalloy Corporation (NASDAQ:SYNL), and Concord Medical Services Hldg Ltd (NYSE:CCM). This group of stocks’ market valuations resemble TCRD’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ELOX 3 662 -1
LITB 1 324 0
SYNL 3 10601 -1
CCM 1 425 0
Average 2 3003 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 2 hedge funds with bullish positions and the average amount invested in these stocks was $3 million. That figure was $10 million in TCRD’s case. Eloxx Pharmaceuticals, Inc. (NASDAQ:ELOX) is the most popular stock in this table. On the other hand Lightinthebox Holding Co Ltd-ADR (NYSE:LITB) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks THL Credit, Inc. (NASDAQ:TCRD) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. Unfortunately TCRD wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on TCRD were disappointed as the stock returned 15.1% during the second quarter (through the end of May) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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