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Hedge Funds Are Selling TCF Financial Corporation (TCF)

Nina Todic

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 700 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their June 28 holdings, data that is available nowhere else. Should you consider TCF Financial Corporation (NASDAQ:TCF) for your portfolio? We'll look to this invaluable collective wisdom for the answer.

TCF Financial Corporation (NASDAQ:TCF) has experienced a decrease in support from the world's most elite money managers recently. Our calculations also showed that TCF isn't among the 30 most popular stocks among hedge funds (view the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds
5 Most Popular Stocks Among Hedge Funds

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Phill Gross, Adage Capital Management
Phill Gross, Adage Capital Management

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a peek at the new hedge fund action encompassing TCF Financial Corporation (NASDAQ:TCF).

What have hedge funds been doing with TCF Financial Corporation (NASDAQ:TCF)?

At the end of the second quarter, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from the previous quarter. The graph below displays the number of hedge funds with bullish position in TCF over the last 16 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

No of Hedge Funds with TCF Positions
No of Hedge Funds with TCF Positions

Among these funds, Citadel Investment Group held the most valuable stake in TCF Financial Corporation (NASDAQ:TCF), which was worth $39.2 million at the end of the second quarter. On the second spot was Arrowstreet Capital which amassed $36.6 million worth of shares. Moreover, Pzena Investment Management, AQR Capital Management, and Adage Capital Management were also bullish on TCF Financial Corporation (NASDAQ:TCF), allocating a large percentage of their portfolios to this stock.

Judging by the fact that TCF Financial Corporation (NASDAQ:TCF) has experienced a decline in interest from the entirety of the hedge funds we track, logic holds that there is a sect of hedgies that slashed their full holdings in the second quarter. It's worth mentioning that John Orrico's Water Island Capital said goodbye to the biggest investment of all the hedgies monitored by Insider Monkey, totaling close to $21.4 million in stock, and Andrew Feldstein and Stephen Siderow's Blue Mountain Capital was right behind this move, as the fund said goodbye to about $13.8 million worth. These moves are important to note, as total hedge fund interest fell by 2 funds in the second quarter.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as TCF Financial Corporation (NASDAQ:TCF) but similarly valued. We will take a look at KAR Auction Services Inc (NYSE:KAR), Hancock Whitney Corporation (NASDAQ:HWC), Spirit Airlines Inc. (NYSE:SAVE), and Bank of Hawaii Corporation (NYSE:BOH). This group of stocks' market valuations match TCF's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KAR,32,631830,-10 HWC,16,103609,1 SAVE,31,302404,-3 BOH,12,87202,0 Average,22.75,281261,-3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $281 million. That figure was $194 million in TCF's case. KAR Auction Services Inc (NYSE:KAR) is the most popular stock in this table. On the other hand Bank of Hawaii Corporation (NYSE:BOH) is the least popular one with only 12 bullish hedge fund positions. TCF Financial Corporation (NASDAQ:TCF) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately TCF wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); TCF investors were disappointed as the stock returned -6.5% during the third quarter 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 many of these stocks already outperformed the market so far in 2019.

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

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