A market surge in the first quarter, spurred by easing global macroeconomic concerns and Powell's pivot ended up having a positive impact on the markets and many hedge funds as a result. The stocks of smaller companies which were especially hard hit during the fourth quarter slightly outperformed the market during the first quarter. Unfortunately, Trump is unpredictable and volatility returned in the second quarter and smaller-cap stocks went back to selling off. We finished compiling the latest 13F filings to get an idea about what hedge funds are thinking about the overall market as well as individual stocks. In this article we will study the hedge fund sentiment to see how those concerns affected their ownership of TCG BDC, Inc. (NASDAQ:CGBD) during the quarter.
Is TCG BDC, Inc. (NASDAQ:CGBD) a buy, sell, or hold? Hedge funds are betting on the stock. The number of long hedge fund positions advanced by 2 lately. Our calculations also showed that CGBD isn't among the 30 most popular stocks among hedge funds. CGBD was in 12 hedge funds' portfolios at the end of the first quarter of 2019. There were 10 hedge funds in our database with CGBD positions at the end of the previous quarter.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We're going to check out the new hedge fund action encompassing TCG BDC, Inc. (NASDAQ:CGBD).
How are hedge funds trading TCG BDC, Inc. (NASDAQ:CGBD)?
At Q1's end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from one quarter earlier. On the other hand, there were a total of 4 hedge funds with a bullish position in CGBD 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.
More specifically, Millennium Management was the largest shareholder of TCG BDC, Inc. (NASDAQ:CGBD), with a stake worth $6.4 million reported as of the end of March. Trailing Millennium Management was Marshall Wace LLP, which amassed a stake valued at $5.6 million. Arrowstreet Capital, Citadel Investment Group, and McKinley Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
As aggregate interest increased, specific money managers have been driving this bullishness. D E Shaw, managed by D. E. Shaw, initiated the most outsized position in TCG BDC, Inc. (NASDAQ:CGBD). D E Shaw had $1 million invested in the company at the end of the quarter. Andrew Feldstein and Stephen Siderow's Blue Mountain Capital also made a $0.1 million investment in the stock during the quarter. The only other fund with a brand new CGBD position is Matthew Hulsizer's PEAK6 Capital Management.
Let's now take a look at hedge fund activity in other stocks similar to TCG BDC, Inc. (NASDAQ:CGBD). These stocks are Associated Capital Group, Inc. (NYSE:AC), Mesa Laboratories, Inc. (NASDAQ:MLAB), 21Vianet Group Inc (NASDAQ:VNET), and Forrester Research, Inc. (NASDAQ:FORR). All of these stocks' market caps match CGBD's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AC,7,70766,3 MLAB,10,53050,1 VNET,18,45451,1 FORR,13,63228,3 Average,12,58124,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $58 million. That figure was $24 million in CGBD's case. 21Vianet Group Inc (NASDAQ:VNET) is the most popular stock in this table. On the other hand Associated Capital Group, Inc. (NYSE:AC) is the least popular one with only 7 bullish hedge fund positions. TCG BDC, Inc. (NASDAQ:CGBD) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on CGBD as the stock returned 6.9% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.