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 at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded TD Ameritrade Holding Corp. (NASDAQ:AMTD) and determine whether the smart money was really smart about this stock.
Is TD Ameritrade Holding Corp. (NASDAQ:AMTD) a buy right now? The best stock pickers were betting on the stock. The number of bullish hedge fund bets advanced by 1 in recent months. TD Ameritrade Holding Corp. (NASDAQ:AMTD) was in 47 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 50. Our calculations also showed that AMTD isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 46 hedge funds in our database with AMTD positions at the end of the first quarter. Video: 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 monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
John Paulson of Paulson & Co
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let's take a glance at the recent hedge fund action encompassing TD Ameritrade Holding Corp. (NASDAQ:AMTD).
How have hedgies been trading TD Ameritrade Holding Corp. (NASDAQ:AMTD)?
Heading into the third quarter of 2020, a total of 47 of the hedge funds tracked by Insider Monkey were long this stock, a change of 2% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in AMTD over the last 20 quarters. With hedgies' sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
More specifically, Pentwater Capital Management was the largest shareholder of TD Ameritrade Holding Corp. (NASDAQ:AMTD), with a stake worth $193.3 million reported as of the end of September. Trailing Pentwater Capital Management was Magnetar Capital, which amassed a stake valued at $127.9 million. Water Island Capital, Renaissance Technologies, and Tudor Investment Corp 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 Hunting Hill Global Capital allocated the biggest weight to TD Ameritrade Holding Corp. (NASDAQ:AMTD), around 11.84% of its 13F portfolio. Water Island Capital is also relatively very bullish on the stock, earmarking 10.43 percent of its 13F equity portfolio to AMTD.
Consequently, key hedge funds were leading the bulls' herd. Paulson & Co, managed by John Paulson, initiated the most outsized position in TD Ameritrade Holding Corp. (NASDAQ:AMTD). Paulson & Co had $35.5 million invested in the company at the end of the quarter. Lee Hicks and Jan Koerner's Park Presidio Capital also made a $34.6 million investment in the stock during the quarter. The following funds were also among the new AMTD investors: Adam Guren's Hunting Hill Global Capital, Clint Carlson's Carlson Capital, and James Chen's Ovata Capital Management.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as TD Ameritrade Holding Corp. (NASDAQ:AMTD) but similarly valued. These stocks are Deutsche Bank Aktiengesellschaft (NYSE:DB), Nasdaq, Inc. (NASDAQ:NDAQ), Copart, Inc. (NASDAQ:CPRT), Banco Santander (Brasil) SA (NYSE:BSBR), Mettler-Toledo International Inc. (NYSE:MTD), Carrier Global Corporation (NYSE:CARR), and Lennar Corporation (NYSE:LEN). All of these stocks' market caps resemble AMTD's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DB,11,1266439,-1 NDAQ,25,153170,-1 CPRT,60,826695,12 BSBR,10,18916,2 MTD,27,584124,-4 CARR,44,1524605,41 LEN,55,1692845,-2 Average,33.1,866685,6.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.1 hedge funds with bullish positions and the average amount invested in these stocks was $867 million. That figure was $1173 million in AMTD's case. Copart, Inc. (NASDAQ:CPRT) is the most popular stock in this table. On the other hand Banco Santander (Brasil) SA (NYSE:BSBR) is the least popular one with only 10 bullish hedge fund positions. TD Ameritrade Holding Corp. (NASDAQ:AMTD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AMTD is 71.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately AMTD wasn't nearly as popular as these 10 stocks and hedge funds that were betting on AMTD were disappointed as the stock returned 6.4% 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.