Is TSLX A Good Stock To Buy Now?

In this article we will check out the progression of hedge fund sentiment towards Sixth Street Specialty Lending Inc (NYSE:TSLX) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Is TSLX a good stock to buy now? Sixth Street Specialty Lending Inc (NYSE:TSLX) investors should pay attention to an increase in hedge fund interest in recent months. Sixth Street Specialty Lending Inc (NYSE:TSLX) was in 11 hedge funds’ portfolios at the end of September. The all time high for this statistics is 15. There were 10 hedge funds in our database with TSLX holdings at the end of June. Our calculations also showed that TSLX 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.

In the 21st century investor’s toolkit there are numerous signals stock market investors use to evaluate publicly traded companies. Some of the less known signals are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the best picks of the elite hedge fund managers can beat the broader indices by a significant amount (see the details here).

Charles Clough of Clough Capital Partners

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 we’re going to take a look at the latest hedge fund action regarding Sixth Street Specialty Lending Inc (NYSE:TSLX).

Do Hedge Funds Think TSLX Is A Good Stock To Buy Now?

At third quarter’s end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TSLX over the last 21 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Arrowstreet Capital was the largest shareholder of Sixth Street Specialty Lending Inc (NYSE:TSLX), with a stake worth $21.8 million reported as of the end of September. Trailing Arrowstreet Capital was Clough Capital Partners, which amassed a stake valued at $14.2 million. Two Sigma Advisors, Millennium Management, and Callodine Capital Management 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 Callodine Capital Management allocated the biggest weight to Sixth Street Specialty Lending Inc (NYSE:TSLX), around 3.48% of its 13F portfolio. Clough Capital Partners is also relatively very bullish on the stock, setting aside 1.02 percent of its 13F equity portfolio to TSLX.

Consequently, key money managers have been driving this bullishness. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the biggest position in Sixth Street Specialty Lending Inc (NYSE:TSLX). Arrowstreet Capital had $21.8 million invested in the company at the end of the quarter. Daniel Johnson’s Gillson Capital also initiated a $3.1 million position during the quarter. The only other fund with a brand new TSLX position is D. E. Shaw’s D E Shaw.

Let’s now review hedge fund activity in other stocks similar to Sixth Street Specialty Lending Inc (NYSE:TSLX). These stocks are Bitauto Hldg Ltd (NYSE:BITA), Steelcase Inc. (NYSE:SCS), NuStar Energy L.P. (NYSE:NS), ICF International Inc (NASDAQ:ICFI), EnPro Industries, Inc. (NYSE:NPO), BEST Inc. (NYSE:BEST), and Herc Holdings Inc. (NYSE:HRI). This group of stocks’ market caps are similar to TSLX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BITA 16 158755 0
SCS 22 93278 0
NS 4 8446 -1
ICFI 12 32049 1
NPO 18 144888 1
BEST 8 13537 2
HRI 19 440444 -2
Average 14.1 127342 0.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.1 hedge funds with bullish positions and the average amount invested in these stocks was $127 million. That figure was $76 million in TSLX’s case. Steelcase Inc. (NYSE:SCS) is the most popular stock in this table. On the other hand NuStar Energy L.P. (NYSE:NS) is the least popular one with only 4 bullish hedge fund positions. Sixth Street Specialty Lending Inc (NYSE:TSLX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TSLX is 47.4. 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. 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 TSLX as the stock returned 22.8% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.

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