After several tireless days we have finished crunching the numbers from nearly 817 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of September 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards TCF Financial Corporation (NASDAQ:TCF).
Is TCF a good stock to buy now? Prominent investors were taking a pessimistic view. The number of bullish hedge fund bets retreated by 3 recently. TCF Financial Corporation (NASDAQ:TCF) was in 11 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 31. Our calculations also showed that TCF isn’t among the 30 most popular stocks among hedge funds (click for Q3 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 66 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, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s take a glance at the new hedge fund action encompassing TCF Financial Corporation (NASDAQ:TCF).
Do Hedge Funds Think TCF Is A Good Stock To Buy Now?
At the end of September, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -21% from the previous quarter. By comparison, 31 hedge funds held shares or bullish call options in TCF a year ago. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
Among these funds, Pzena Investment Management held the most valuable stake in TCF Financial Corporation (NASDAQ:TCF), which was worth $28.5 million at the end of the third quarter. On the second spot was Adage Capital Management which amassed $11.9 million worth of shares. Carlson Capital, Mendon Capital Advisors, and Citadel Investment Group 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 Mendon Capital Advisors allocated the biggest weight to TCF Financial Corporation (NASDAQ:TCF), around 3.07% of its 13F portfolio. Pzena Investment Management is also relatively very bullish on the stock, setting aside 0.18 percent of its 13F equity portfolio to TCF.
Because TCF Financial Corporation (NASDAQ:TCF) has witnessed a decline in interest from hedge fund managers, it’s safe to say that there were a few hedge funds who were dropping their full holdings in the third quarter. Intriguingly, Paul Magidson, Jonathan Cohen. And Ostrom Enders’s Castine Capital Management dumped the biggest stake of the 750 funds monitored by Insider Monkey, worth about $8.9 million in stock, and Gregg Moskowitz’s Interval Partners was right behind this move, as the fund cut about $2.5 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 3 funds in the third quarter.
Let’s check out hedge fund activity in other stocks similar to TCF Financial Corporation (NASDAQ:TCF). We will take a look at Flowserve Corporation (NYSE:FLS), Canada Goose Holdings Inc. (NYSE:GOOS), Southwest Gas Holdings, Inc. (NYSE:SWX), Valvoline Inc. (NYSE:VVV), National Oilwell Varco, Inc. (NYSE:NOV), MSC Industrial Direct Co Inc (NYSE:MSM), and The Hanover Insurance Group, Inc. (NYSE:THG). All of these stocks’ market caps are similar to TCF’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 24.7 hedge funds with bullish positions and the average amount invested in these stocks was $281 million. That figure was $60 million in TCF’s case. Valvoline Inc. (NYSE:VVV) is the most popular stock in this table. On the other hand Southwest Gas Holdings, Inc. (NYSE:SWX) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks TCF Financial Corporation (NASDAQ:TCF) is even less popular than SWX. Our overall hedge fund sentiment score for TCF is 12.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Hedge funds clearly dropped the ball on TCF as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on TCF as the stock returned 54.2% since Q3 (through December 8th) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.