In this article we are going to use hedge fund sentiment as a tool and determine whether Community Financial Corp (NASDAQ:TCFC) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Community Financial Corp (NASDAQ:TCFC) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 3 hedge funds’ portfolios at the end of the third quarter of 2020. Our calculations also showed that TCFC 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). At the end of this article we will also compare TCFC to other stocks including PlayAGS, Inc. (NYSE:AGS), Diana Shipping Inc. (NYSE:DSX), and vTv Therapeutics Inc (NASDAQ:VTVT) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
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 10 most profitable companies in the world 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. Now let’s take a gander at the fresh hedge fund action surrounding Community Financial Corp (NASDAQ:TCFC).
What does smart money think about Community Financial Corp (NASDAQ:TCFC)?
At Q3’s end, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 2 hedge funds with a bullish position in TCFC a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Fourthstone LLC, managed by Phil Stone, holds the biggest position in Community Financial Corp (NASDAQ:TCFC). Fourthstone LLC has a $11.7 million position in the stock, comprising 9.8% of its 13F portfolio. On Fourthstone LLC’s heels is Private Capital Management, led by Gregg J. Powers, holding a $3 million position; 0.7% of its 13F portfolio is allocated to the company. In terms of the portfolio weights assigned to each position Fourthstone LLC allocated the biggest weight to Community Financial Corp (NASDAQ:TCFC), around 9.82% of its 13F portfolio. Private Capital Management is also relatively very bullish on the stock, setting aside 0.69 percent of its 13F equity portfolio to TCFC.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s go over hedge fund activity in other stocks similar to Community Financial Corp (NASDAQ:TCFC). These stocks are PlayAGS, Inc. (NYSE:AGS), Diana Shipping Inc. (NYSE:DSX), vTv Therapeutics Inc (NASDAQ:VTVT), Olympic Steel, Inc. (NASDAQ:ZEUS), Applied Genetic Technologies Corp (NASDAQ:AGTC), Protalix BioTherapeutics Inc. (NYSE:PLX), and Barnes & Noble Education Inc (NYSE:BNED). This group of stocks’ market valuations are similar to TCFC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AGS | 11 | 21646 | -2 |
| DSX | 7 | 19056 | 0 |
| VTVT | 4 | 2795 | 1 |
| ZEUS | 5 | 3338 | -1 |
| AGTC | 11 | 25666 | 3 |
| PLX | 3 | 11491 | -1 |
| BNED | 11 | 13375 | -1 |
| Average | 7.4 | 13910 | -0.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.4 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $16 million in TCFC’s case. PlayAGS, Inc. (NYSE:AGS) is the most popular stock in this table. On the other hand Protalix BioTherapeutics Inc. (NYSE:PLX) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Community Financial Corp (NASDAQ:TCFC) is even less popular than PLX. Our overall hedge fund sentiment score for TCFC is 23. 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. Hedge funds clearly dropped the ball on TCFC 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 28.1% in 2020 through November 23rd and still beat the market by 15.4 percentage points. A small number of hedge funds were also right about betting on TCFC as the stock returned 26.8% since Q3 (through November 23rd) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
