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Should You Buy TCP Capital Corp (TCPC)?

Hedge funds are not perfect. They have their bad picks just like everyone else. Micron, a stock hedge funds have loved, lost 50% during the last 12 months ending on October 30. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 30 S&P 500 stocks among hedge funds at the end of September 2014 yielded an average return of 9.5% in the same time period, vs. a gain of 5.2% for the S&P 500 Index. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of TCP Capital Corp (NASDAQ:TCPC).

Is TCP Capital Corp (NASDAQ:TCPC) a buy here? Hedge funds are in a bullish mood. The number of long hedge fund positions went up by 3 in recent months. TCPC was in 7 hedge funds’ portfolios at the end of the third quarter of 2015. There were 4 hedge funds in our database with TCPC positions at the end of the previous quarter. At the end of this article we will also compare TCPC to other stocks including Blackrock Kelso Capital Corp. (NASDAQ:BKCC), Cellectis SA (ADR) (NASDAQ:CLLS), and CIRCOR International, Inc. (NYSE:CIR) to get a better sense of its popularity.

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In today’s marketplace, there is a multitude of gauges shareholders put to use to value stocks. Two of the less known gauges are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the top picks of the best fund managers can outpace the broader indices by a very impressive margin (see the details here).

Keeping this in mind, let’s review the key action regarding TCP Capital Corp (NASDAQ:TCPC).

How are hedge funds trading TCP Capital Corp (NASDAQ:TCPC)?

At Q3’s end, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 75% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, P.A.W. CAPITAL PARTNERS, managed by Peter A. Wright, holds the number one position in TCP Capital Corp (NASDAQ:TCPC). P.A.W. CAPITAL PARTNERS has an $2 million position in the stock, comprising 2.3% of its 13F portfolio. The second largest stake is held by Robert B. Gillam of McKinley Capital Management, with an $1.4 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other professional money managers that hold long positions comprise Christopher C. Grisanti’s Grisanti Brown & Partners, Israel Englander’s Millennium Management and Ken Griffin’s Citadel Investment Group.

With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls’ herd. Millennium Management, managed by Israel Englander, established a position in TCP Capital Corp (NASDAQ:TCPC). Millennium Management had $0.6 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also initiated an $0.2 million position during the quarter. The only other fund with a brand new TCPC position is Peter Muller’s PDT Partners.

Let’s now take a look at hedge fund activity in other stocks similar to TCP Capital Corp (NASDAQ:TCPC). These stocks are Blackrock Kelso Capital Corp. (NASDAQ:BKCC), Cellectis SA (ADR) (NASDAQ:CLLS), CIRCOR International, Inc. (NYSE:CIR), and Transocean Partners LLC (NYSE:RIGP). 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
BKCC 9 6825 1
CLLS 11 27445 1
CIR 11 155482 2
RIGP 7 33841 -1

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $56 million. That figure was $6 million in TCPC’s case. Cellectis SA (ADR) (NASDAQ:CLLS) is the most popular stock in this table. On the other hand, Transocean Partners LLC (NYSE:RIGP) is the least popular one with only 7 bullish hedge fund positions. With the same number of bullish hedge fund positions as RIGP, TCP Capital Corp (NASDAQ:TCPC) also hasn’t attracted much attention from investors. This isn’t necessarily a bad sign; it is possible that investors thought of the stock as overpriced, but only because they weren’t familiar with the bullish thesis. In either case further research is warranted.

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