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Is Tristate Capital Holdings Inc (TSC) A Good Stock To Buy?

The market has been volatile in the last few months as the Federal Reserve finalized its rate cuts and uncertainty looms over trade negotiations with China. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points over the last 12 months. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure since summer months, though some funds increased their exposure dramatically at the end of Q3 and the beginning of Q4. In this article, we analyze what the smart money thinks of Tristate Capital Holdings Inc (NASDAQ:TSC) and find out how it is affected by hedge funds’ moves.

Tristate Capital Holdings Inc (NASDAQ:TSC) investors should pay attention to a decrease in hedge fund interest in recent months. TSC was in 9 hedge funds’ portfolios at the end of September. There were 10 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 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.

If you’d ask most shareholders, hedge funds are seen as slow, old investment vehicles of the past. While there are more than 8000 funds with their doors open at the moment, Our researchers choose to focus on the leaders of this group, around 750 funds. These hedge fund managers preside over bulk of the smart money’s total asset base, and by following their best equity investments, Insider Monkey has unearthed a few investment strategies that have historically surpassed the broader indices. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points annually since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

Chuck Royce

Chuck Royce of Royce & Associates

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a peek at the recent hedge fund action surrounding Tristate Capital Holdings Inc (NASDAQ:TSC).

How have hedgies been trading Tristate Capital Holdings Inc (NASDAQ:TSC)?

At Q3’s end, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TSC over the last 17 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is TSC A Good Stock To Buy?

The largest stake in Tristate Capital Holdings Inc (NASDAQ:TSC) was held by Royce & Associates, which reported holding $16.4 million worth of stock at the end of September. It was followed by Second Curve Capital with a $13 million position. Other investors bullish on the company included Renaissance Technologies, Marshall Wace, and Two Sigma Advisors. 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 7.96% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, dishing out 0.15 percent of its 13F equity portfolio to TSC.

Since Tristate Capital Holdings Inc (NASDAQ:TSC) has experienced declining sentiment from the aggregate hedge fund industry, it’s safe to say that there were a few funds that decided to sell off their entire stakes by the end of the third quarter. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital cut the largest stake of all the hedgies monitored by Insider Monkey, totaling an estimated $1.3 million in stock, and Michael Gelband’s ExodusPoint Capital was right behind this move, as the fund cut about $0.3 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 1 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks similar to Tristate Capital Holdings Inc (NASDAQ:TSC). We will take a look at SurModics, Inc. (NASDAQ:SRDX), AquaVenture Holdings Limited (NYSE:WAAS), At Home Group Inc. (NYSE:HOME), and Ruth’s Hospitality Group, Inc. (NASDAQ:RUTH). This group of stocks’ market values are similar to TSC’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SRDX 13 138577 -1
WAAS 12 25073 3
HOME 16 201048 1
RUTH 16 49546 0
Average 14.25 103561 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $104 million. That figure was $42 million in TSC’s case. At Home Group Inc. (NYSE:HOME) is the most popular stock in this table. On the other hand AquaVenture Holdings Limited (NYSE:WAAS) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Tristate Capital Holdings Inc (NASDAQ:TSC) is even less popular than WAAS. Hedge funds clearly dropped the ball on TSC 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 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 TSC as the stock returned 15.2% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.

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

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