Hedge Funds Bought TD Ameritrade (AMTD) Before The Merger Announcement

The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards TD Ameritrade Holding Corp. (NASDAQ:AMTD).

TD Ameritrade Holding Corp. (NASDAQ:AMTD) has experienced an increase in activity from the world’s largest hedge funds of late. 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 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.


Israel Englander of Millennium Management

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a look at the fresh hedge fund action surrounding TD Ameritrade Holding Corp. (NASDAQ:AMTD).

Hedge fund activity in TD Ameritrade Holding Corp. (NASDAQ:AMTD)

Heading into the fourth quarter of 2019, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 32% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards AMTD over the last 17 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).


Among these funds, Renaissance Technologies held the most valuable stake in TD Ameritrade Holding Corp. (NASDAQ:AMTD), which was worth $120.3 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $59.6 million worth of shares. 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 Corp. (NASDAQ:AMTD), around 7.36% of its portfolio. Prana Capital Management is also relatively very bullish on the stock, setting aside 2.1 percent of its 13F equity portfolio to AMTD.

As industrywide interest jumped, specific money managers have jumped into TD Ameritrade Holding Corp. (NASDAQ:AMTD) headfirst. Prana Capital Management, managed by Peter Seuss, assembled the most valuable position in TD Ameritrade Holding Corp. (NASDAQ:AMTD). Prana Capital Management had $11.7 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also made a $3.2 million investment in the stock 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 go over hedge fund activity in other stocks similar to TD Ameritrade Holding Corp. (NASDAQ:AMTD). These stocks are Fiat Chrysler Automobiles NV (NYSE:FCAU), KLA Corporation (NASDAQ:KLAC), McKesson Corporation (NYSE:MCK), and Sprint Corporation (NYSE:S). This group of stocks’ market values are similar to AMTD’s market value.

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 Corp. (NASDAQ:AMTD) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on AMTD as the stock returned 11.9% during the first two months of Q4 and outperformed the market by an even larger margin.

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