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

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 5.2% over the 12-month period ending October 30th, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey (as of September 2014) generated a return of 9.5% over the same time span, with 63% of these stocks outperforming the benchmark. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Tristate Capital Holdings Inc (NASDAQ:TSC).

Tristate Capital Holdings Inc (NASDAQ:TSC) investors should pay attention to a decrease in enthusiasm from smart money lately. TSC was in 11 hedge funds’ portfolios at the end of the third quarter of 2015. There were 12 hedge funds in our database with TSC holdings 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 SciClone Pharmaceuticals, Inc. (NASDAQ:SCLN), PennyMac Financial Services Inc (NYSE:PFSI), and Elizabeth Arden, Inc. (NASDAQ:RDEN) to gather more data points.

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With all of this in mind, let’s take a gander at the fresh action surrounding Tristate Capital Holdings Inc (NASDAQ:TSC).

Hedge fund activity in Tristate Capital Holdings Inc (NASDAQ:TSC)

At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from the previous quarter. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Tom Brown’s Second Curve Capital has the number one position in Tristate Capital Holdings Inc (NASDAQ:TSC), worth close to $16.9 million, accounting for 7.6% of its total 13F portfolio. The second most bullish fund manager is Elizabeth Park Capital Management, led by Fred Cummings, holding a $7 million position; 2.3% of its 13F portfolio is allocated to the stock. Other professional money managers with similar optimism comprise Chuck Royce’s Royce & Associates, Jim Simons’s Renaissance Technologies and Charles Paquelet’s Skylands Capital.

Since Tristate Capital Holdings Inc (NASDAQ:TSC) has witnessed falling interest from the aggregate hedge fund industry, it’s safe to say that there is a sect of hedge funds that decided to sell off their entire stakes by the end of the third quarter. It’s worth mentioning that Paul Magidson, Jonathan Cohen. And Ostrom Enders’s Castine Capital Management cut the biggest investment of the 700 funds followed by Insider Monkey, valued at about $1.3 million in stock. Gregory Fraser, Rudolph Kluiber, and Timothy Krochuk’s fund, GRT Capital Partners, also cut its stock, about $0.2 million worth. These transactions are interesting, as total hedge fund interest fell by 1 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Tristate Capital Holdings Inc (NASDAQ:TSC) but similarly valued. These stocks are SciClone Pharmaceuticals, Inc. (NASDAQ:SCLN), PennyMac Financial Services Inc (NYSE:PFSI), Elizabeth Arden, Inc. (NASDAQ:RDEN), and Bridgepoint Education Inc (NYSE:BPI). This group of 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
SCLN 14 21087 -6
PFSI 16 161562 0
RDEN 8 22180 -1
BPI 11 38940 -4

As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $61 million.That figure was $35 million in TSC’s case. PennyMac Financial Services Inc (NYSE:PFSI) is the most popular stock in this table. On the other hand Elizabeth Arden, Inc. (NASDAQ:RDEN) is the least popular one with only 8 bullish hedge fund positions. Tristate Capital Holdings Inc (NASDAQ:TSC) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard PFSI might be a better candidate to consider a long position.

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