Does TCG BDC, Inc. (NASDAQ:CGBD) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.
Is TCG BDC, Inc. (NASDAQ:CGBD) a buy, sell, or hold? Prominent investors are in a pessimistic mood. The number of bullish hedge fund bets went down by 4 lately. Our calculations also showed that CGBD isn't among the 30 most popular stocks among hedge funds (see the video below). CGBD was in 8 hedge funds' portfolios at the end of June. There were 12 hedge funds in our database with CGBD holdings at the end of the previous quarter. Video: Click the image to 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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
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 gander at the new hedge fund action surrounding TCG BDC, Inc. (NASDAQ:CGBD).
What does smart money think about TCG BDC, Inc. (NASDAQ:CGBD)?
At Q2's end, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -33% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CGBD over the last 16 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in TCG BDC, Inc. (NASDAQ:CGBD) was held by Millennium Management, which reported holding $10.9 million worth of stock at the end of March. It was followed by Arrowstreet Capital with a $6.7 million position. Other investors bullish on the company included D E Shaw, McKinley Capital Management, and Citadel Investment Group.
Since TCG BDC, Inc. (NASDAQ:CGBD) has faced bearish sentiment from the aggregate hedge fund industry, it's easy to see that there lies a certain "tier" of fund managers that slashed their positions entirely heading into Q3. Intriguingly, Paul Marshall and Ian Wace's Marshall Wace LLP dumped the largest stake of the "upper crust" of funds monitored by Insider Monkey, worth close to $5.6 million in stock, and Noam Gottesman's GLG Partners was right behind this move, as the fund dropped about $0.6 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 4 funds heading into Q3.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as TCG BDC, Inc. (NASDAQ:CGBD) but similarly valued. These stocks are General American Investors Company, Inc. (NYSE:GAM), CIRCOR International, Inc. (NYSE:CIR), Navigant Consulting, Inc. (NYSE:NCI), and California Resources Corporation (NYSE:CRC). This group of stocks' market values are closest to CGBD's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GAM,5,128273,0 CIR,10,175397,3 NCI,11,52264,-4 CRC,12,115705,-3 Average,9.5,117910,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $118 million. That figure was $31 million in CGBD's case. California Resources Corporation (NYSE:CRC) is the most popular stock in this table. On the other hand General American Investors Company, Inc. (NYSE:GAM) is the least popular one with only 5 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. 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 CGBD wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CGBD investors were disappointed as the stock returned -3.1% 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.