We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on December 31st. We at Insider Monkey have made an extensive database of more than 835 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded TFS Financial Corporation (NASDAQ:TFSL) based on those filings.
Is TFS Financial Corporation (NASDAQ:TFSL) going to take off soon? Money managers are betting on the stock. The number of long hedge fund bets rose by 3 in recent months. Our calculations also showed that TFSL isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). TFSL was in 11 hedge funds' portfolios at the end of December. There were 8 hedge funds in our database with TFSL positions at the end of the previous quarter.
In the eyes of most market participants, hedge funds are assumed to be slow, old investment vehicles of years past. While there are over 8000 funds in operation today, Our researchers look at the aristocrats of this club, approximately 850 funds. These investment experts watch over bulk of the hedge fund industry's total asset base, and by following their finest stock picks, Insider Monkey has determined a number of investment strategies that have historically outpaced the broader indices. Insider Monkey's flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_758440" align="aligncenter" width="400"] Michael Price of MFP Investors[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Now let's view the latest hedge fund action regarding TFS Financial Corporation (NASDAQ:TFSL).
What have hedge funds been doing with TFS Financial Corporation (NASDAQ:TFSL)?
At the end of the fourth quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 38% from the previous quarter. The graph below displays the number of hedge funds with bullish position in TFSL over the last 18 quarters. With hedgies' capital changing hands, there exists an "upper tier" of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in TFS Financial Corporation (NASDAQ:TFSL), which was worth $125.1 million at the end of the third quarter. On the second spot was Empyrean Capital Partners which amassed $35.2 million worth of shares. Winton Capital Management, AQR Capital Management, and Millennium 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 Empyrean Capital Partners allocated the biggest weight to TFS Financial Corporation (NASDAQ:TFSL), around 2.31% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, setting aside 0.1 percent of its 13F equity portfolio to TFSL.
With a general bullishness amongst the heavyweights, key hedge funds have been driving this bullishness. Bridgewater Associates, managed by Ray Dalio, created the largest position in TFS Financial Corporation (NASDAQ:TFSL). Bridgewater Associates had $1.1 million invested in the company at the end of the quarter. Schonfeld Strategic Advisors also made a $0.3 million investment in the stock during the quarter. The only other fund with a new position in the stock is Frederick DiSanto's Ancora Advisors.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as TFS Financial Corporation (NASDAQ:TFSL) but similarly valued. These stocks are Toll Brothers Inc (NYSE:TOL), The Howard Hughes Corporation (NYSE:HHC), Gold Fields Limited (NYSE:GFI), and Acuity Brands, Inc. (NYSE:AYI). All of these stocks' market caps resemble TFSL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TOL,31,504909,7 HHC,25,671378,-1 GFI,18,374752,1 AYI,29,822404,1 Average,25.75,593361,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.75 hedge funds with bullish positions and the average amount invested in these stocks was $593 million. That figure was $173 million in TFSL's case. Toll Brothers Inc (NYSE:TOL) is the most popular stock in this table. On the other hand Gold Fields Limited (NYSE:GFI) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks TFS Financial Corporation (NASDAQ:TFSL) is even less popular than GFI. Hedge funds dodged a bullet by taking a bearish stance towards TFSL. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but managed to beat the market by 4.2 percentage points. Unfortunately TFSL wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); TFSL investors were disappointed as the stock returned -32.5% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.