Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Tristate Capital Holdings Inc (NASDAQ:TSC).
Tristate Capital Holdings Inc (NASDAQ:TSC) investors should be aware of an increase in hedge fund interest recently. TSC was in 16 hedge funds’ portfolios at the end of March. There were 12 hedge funds in our database with TSC holdings at the end of the previous quarter. Our calculations also showed that TSC 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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’ 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 S&P 500 ETFs by 58 percentage points since March 2017 (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.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a gander at the key hedge fund action regarding Tristate Capital Holdings Inc (NASDAQ:TSC).
How are hedge funds trading Tristate Capital Holdings Inc (NASDAQ:TSC)?
Heading into the second quarter of 2020, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the fourth quarter of 2019. On the other hand, there were a total of 13 hedge funds with a bullish position in TSC a year ago. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
The largest stake in Tristate Capital Holdings Inc (NASDAQ:TSC) was held by Royce & Associates, which reported holding $7.2 million worth of stock at the end of September. It was followed by Driehaus Capital with a $3.4 million position. Other investors bullish on the company included Renaissance Technologies, Citadel Investment Group, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Second Curve Capital allocated the biggest weight to Tristate Capital Holdings Inc (NASDAQ:TSC), around 8.7% of its 13F portfolio. Skylands Capital is also relatively very bullish on the stock, setting aside 0.26 percent of its 13F equity portfolio to TSC.
Now, key money managers have been driving this bullishness. Skylands Capital, managed by Charles Paquelet, established the most valuable position in Tristate Capital Holdings Inc (NASDAQ:TSC). Skylands Capital had $1.2 million invested in the company at the end of the quarter. Noam Gottesman’s GLG Partners also made a $0.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Greg Eisner’s Engineers Gate Manager, Frederick DiSanto’s Ancora Advisors, and Peter Algert and Kevin Coldiron’s Algert Coldiron Investors.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Tristate Capital Holdings Inc (NASDAQ:TSC) but similarly valued. We will take a look at Value Line, Inc. (NASDAQ:VALU), Crestwood Equity Partners LP (NYSE:CEQP), XBiotech Inc. (NASDAQ:XBIT), and BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX). All of these stocks’ market caps are closest to TSC’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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 $30 million. That figure was $24 million in TSC’s case. BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX) is the most popular stock in this table. On the other hand Value Line, Inc. (NASDAQ:VALU) is the least popular one with only 2 bullish hedge fund positions. Tristate Capital Holdings Inc (NASDAQ:TSC) is not the most popular stock in this group but hedge fund interest is still above average. 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 13.3% in 2020 through June 25th but still beat the market by 16.8 percentage points. Hedge funds were also right about betting on TSC as the stock returned 54.1% in Q2 (through June 25th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.