Is TCP Capital Corp (TCPC) A Good Stock to Buy?

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The S&P 500 Index gained 7.6% in the 12 month-period that ended November 21, while less than 49% of its stocks beat the benchmark. In contrast, the 30 most popular mid-cap stocks among the top hedge fund investors tracked by the Insider Monkey team returned 18% over the same period, which provides evidence that these money managers do have great stock picking abilities. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like TCP Capital Corp (NASDAQ:TCPC).

TCP Capital Corp (NASDAQ:TCPC) has seen a decrease in hedge fund interest recently. TCPC was in 6 hedge funds’ portfolios at the end of September. There were 9 hedge funds in our database with TCPC holdings at the end of June. At the end of this article we will also compare TCPC to other stocks including Ambac Financial Group, Inc. (NASDAQ:AMBC), Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA), and Asanko Gold Inc (NYSEAMEX:AKG) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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What does the smart money think about TCP Capital Corp (NASDAQ:TCPC)?

At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a decline of 33% from the previous quarter. The graph below displays the number of hedge funds with bullish positions in TCPC over the last 5 quarters, which has been somewhat volatile. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.


According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Robert B. Gillam’s McKinley Capital Management holds the most valuable position in TCP Capital Corp (NASDAQ:TCPC). McKinley Capital Management has a $3.4 million position in the stock. Coming in second is Peter A. Wright’s P.A.W. CAPITAL PARTNERS, holding a $2 million position; the fund has 2.1% of its 13F portfolio invested in the stock. Remaining peers that are bullish include John Overdeck and David Siegel’s Two Sigma Advisors, Peter Muller’s PDT Partners, and George Hall’s Clinton Group. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds, which is based on the performance of their 13F long positions in non-micro-cap stocks.

Since TCP Capital Corp (NASDAQ:TCPC) has experienced bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there is a sect of funds who were dropping their full holdings in the third quarter. At the top of the heap, Millennium Management, one of the 10 largest hedge funds in the world, sold off the biggest investment of all the hedgies tracked by Insider Monkey, comprising an estimated $1.1 million in stock. John Fichthorn’s fund, Dialectic Capital Management, also said goodbye to its stock, about $0.7 million worth.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as TCP Capital Corp (NASDAQ:TCPC) but similarly valued. These stocks are Ambac Financial Group, Inc. (NASDAQ:AMBC), Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA), Asanko Gold Inc (NYSEAMEX:AKG), and Barnes & Noble, Inc. (NYSE:BKS). This group of stocks’ market values are closest to TCPC’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AMBC 21 178704 1
MNTA 13 136273 2
AKG 8 87646 0
BKS 15 153873 -6

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $139 million. That figure was $8 million in TCPC’s case. Ambac Financial Group, Inc. (NASDAQ:AMBC) is the most popular stock in this table. On the other hand Asanko Gold Inc (NYSEAMEX:AKG) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks TCP Capital Corp (NASDAQ:TCPC) is even less popular than AKG. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock.

Disclosure: None