How do we determine whether TFS Financial Corporation (NASDAQ:TFSL) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
TFS Financial Corporation (NASDAQ:TFSL) investors should pay attention to a decrease in support from the world's most elite money managers of late. TFSL was in 7 hedge funds' portfolios at the end of the fourth quarter of 2018. There were 9 hedge funds in our database with TFSL positions at the end of the previous quarter. Our calculations also showed that TFSL isn't among the 30 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 32 percentage points since May 2014 through March 12, 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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to take a look at the recent hedge fund action encompassing TFS Financial Corporation (NASDAQ:TFSL).
Hedge fund activity in TFS Financial Corporation (NASDAQ:TFSL)
At Q4's end, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of -22% from the previous quarter. On the other hand, there were a total of 7 hedge funds with a bullish position in TFSL a year ago. With hedgies' capital changing hands, there exists an "upper tier" of key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of TFS Financial Corporation (NASDAQ:TFSL), with a stake worth $104.3 million reported as of the end of September. Trailing Renaissance Technologies was Empyrean Capital Partners, which amassed a stake valued at $28.9 million. Citadel Investment Group, Balyasny Asset Management, and AQR Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
Since TFS Financial Corporation (NASDAQ:TFSL) has witnessed declining sentiment from hedge fund managers, logic holds that there is a sect of fund managers that elected to cut their entire stakes by the end of the third quarter. At the top of the heap, Alec Litowitz and Ross Laser's Magnetar Capital dropped the biggest investment of the 700 funds monitored by Insider Monkey, worth close to $0.3 million in stock. Brandon Haley's fund, Holocene Advisors, also said goodbye to its stock, about $0.2 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 2 funds by the end of the third quarter.
Let's also examine hedge fund activity in other stocks similar to TFS Financial Corporation (NASDAQ:TFSL). These stocks are The Stars Group Inc. (NASDAQ:TSG), Wyndham Hotels & Resorts, Inc. (NYSE:WH), Cameco Corporation (NYSE:CCJ), and SAGE Therapeutics Inc (NASDAQ:SAGE). 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 TSG,40,582898,-12 WH,37,834677,-2 CCJ,24,346331,5 SAGE,29,330966,-8 Average,32.5,523718,-4.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.5 hedge funds with bullish positions and the average amount invested in these stocks was $524 million. That figure was $137 million in TFSL's case. The Stars Group Inc. (NASDAQ:TSG) is the most popular stock in this table. On the other hand Cameco Corporation (NYSE:CCJ) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks TFS Financial Corporation (NASDAQ:TFSL) is even less popular than CCJ. Hedge funds dodged a bullet by taking a bearish stance towards TFSL. Our calculations showed that the top 15 most popular hedge fund stocks returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately TFSL wasn't nearly as popular as these 15 stock (hedge fund sentiment was very bearish); TFSL investors were disappointed as the stock returned 2% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.