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Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Truist Financial Corporation (NYSE:TFC).
Is TFC stock a buy or sell? The smart money was getting more optimistic. The number of long hedge fund positions went up by 11 recently. Truist Financial Corporation (NYSE:TFC) was in 40 hedge funds' portfolios at the end of December. The all time high for this statistic is 45. Our calculations also showed that TFC isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ric Dillon of Diamond Hill Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we're going to take a gander at the latest hedge fund action regarding Truist Financial Corporation (NYSE:TFC).
Do Hedge Funds Think TFC Is A Good Stock To Buy Now?
At the end of December, a total of 40 of the hedge funds tracked by Insider Monkey were long this stock, a change of 38% from the third quarter of 2020. By comparison, 35 hedge funds held shares or bullish call options in TFC a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Truist Financial Corporation (NYSE:TFC) was held by Diamond Hill Capital, which reported holding $301.2 million worth of stock at the end of December. It was followed by Millennium Management with a $63 million position. Other investors bullish on the company included Citadel Investment Group, Gillson Capital, and Schonfeld Strategic Advisors. In terms of the portfolio weights assigned to each position Soapstone Capital allocated the biggest weight to Truist Financial Corporation (NYSE:TFC), around 4.13% of its 13F portfolio. Gillson Capital is also relatively very bullish on the stock, designating 2.28 percent of its 13F equity portfolio to TFC.
With a general bullishness amongst the heavyweights, specific money managers were leading the bulls' herd. Diamond Hill Capital, managed by Ric Dillon, established the largest position in Truist Financial Corporation (NYSE:TFC). Diamond Hill Capital had $301.2 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also made a $22.5 million investment in the stock during the quarter. The following funds were also among the new TFC investors: Renaissance Technologies, Ray Dalio's Bridgewater Associates, and William Harnisch's Peconic Partners LLC.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Truist Financial Corporation (NYSE:TFC) but similarly valued. These stocks are Illinois Tool Works Inc. (NYSE:ITW), Global Payments Inc (NYSE:GPN), Equinix Inc (REIT) (NASDAQ:EQIX), The PNC Financial Services Group Inc. (NYSE:PNC), Brookfield Asset Management Inc. (NYSE:BAM), Ecolab Inc. (NYSE:ECL), and Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX). This group of stocks' market valuations match TFC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ITW,40,704116,1 GPN,55,5554643,-2 EQIX,42,2001101,0 PNC,35,188415,-2 BAM,38,1330514,3 ECL,45,2449625,-7 VRTX,53,3108859,-2 Average,44,2191039,-1.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 44 hedge funds with bullish positions and the average amount invested in these stocks was $2191 million. That figure was $526 million in TFC's case. Global Payments Inc (NYSE:GPN) is the most popular stock in this table. On the other hand The PNC Financial Services Group Inc. (NYSE:PNC) is the least popular one with only 35 bullish hedge fund positions. Truist Financial Corporation (NYSE:TFC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TFC is 49.2. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. A small number of hedge funds were also right about betting on TFC as the stock returned 23.2% since the end of the fourth quarter (through 3/19) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.