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Is TD Ameritrade Holding Corp. (AMTD) A Good Stock To Buy?

The worries about the economic slowdown in China and the ongoing uncertainty about the path of interest-rate increases triggered several waves of equity sell-offs during the third quarter. Of course, most hedge funds and other asset managers had to stomach substantial losses during the bloody three-month period, which might have caused some to consider fleeing the U.S. equity markets. Interestingly, smaller-cap stocks registered higher losses than large-capitalization stocks during the September quarter, suggesting that institutional investors heavily discarded seemingly riskier equities amid high uncertainty and turmoil. In fact, the Russell 2000 Index lost 11.9% in the third quarter, while the Standard and Poor’s 500 benchmark declined a mere 6.4%. This article will lay out and discuss the hedge fund and institutional investor sentiment towards TD Ameritrade Holding Corp. (NYSE:AMTD).

TD Ameritrade Holding Corp. (NYSE:AMTD) has seen a decrease in support from the world’s most elite money managers in recent months. TD Ameritrade Holding Corp. (NYSE:AMTD) was in 19 hedge funds’ portfolios at the end of September. There were 21 hedge funds in our database with TD Ameritrade Holding Corp. (NYSE:AMTD) positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as HCP, Inc. (NYSE:HCP), Paychex, Inc. (NASDAQ:PAYX), and Potash Corp. of Saskatchewan (USA) (NYSE:POT) to gather more data points.

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At the moment there are tons of metrics investors use to analyze their stock investments. A couple of the less utilized metrics are hedge fund and insider trading interest. our experts have shown that, historically, those who follow the best picks of the top fund managers can outclass the market by a very impressive margin (see the details here).

With all of this in mind, we’re going to review the latest action surrounding TD Ameritrade Holding Corp. (NYSE:AMTD).

What have hedge funds been doing with TD Ameritrade Holding Corp. (NYSE:AMTD)?

At the end of the third quarter, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a decline of 10% from the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Robert Joseph Caruso’s Select Equity Group had the most valuable position in TD Ameritrade Holding Corp. (NYSE:AMTD), worth close to $201.1 million, accounting for 1.9% of its total 13F portfolio. Coming in second is Charles Akre of Akre Capital Management, with a $102.7 million position; the fund has 2.4% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish encompass Ken Griffin’s Citadel Investment Group, and Ken Heebner’s Capital Growth Management.

Judging by the fact that TD Ameritrade Holding Corp. (NYSE:AMTD) has witnessed declining sentiment from the smart money, we can see that there exists a select few hedge funds who sold off their positions entirely at the end of the third quarter. At the top of the heap, Israel Englander’s Millennium Management sold off the largest stake of all the hedgies watched by Insider Monkey, worth close to $9.2 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also dumped its stock, about $5.5 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds at the end of the third quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as TD Ameritrade Holding Corp. (NYSE:AMTD) but similarly valued. These stocks are HCP, Inc. (NYSE:HCP), Paychex, Inc. (NASDAQ:PAYX), Potash Corp. of Saskatchewan (USA) (NYSE:POT), and Vornado Realty Trust (NYSE:VNO). This group of stocks’ market valuations are similar to TD Ameritrade Holding Corp. (NYSE:AMTD)’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HCP 17 265362 -2
PAYX 22 485273 -9
POT 31 822713 1
VNO 23 528621 3

As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $525 million, versus $476 millions in TD Ameritrade Holding Corp. (NYSE:AMTD)’s case. Potash Corp. of Saskatchewan (USA) (NYSE:POT) is the most popular stock in this table. On the other hand, HCP, Inc. (NYSE:HCP) is the least popular one with only 17 bullish hedge fund positions. TD Ameritrade Holding Corp. (NYSE:AMTD) is not the least popular stock in this group, but hedge fund interest is still below average, which might suggest that some other stocks from the list represent better alternatives. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard Potash Corp. of Saskatchewan (USA) (NYSE:POT) might be a better candidate to consider a long position.

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