Is TSC A Good Stock To Buy Now?
Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren't timid and registered double digit market beating gains. Financials, energy and industrial stocks aren't doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to Tristate Capital Holdings Inc (NASDAQ:TSC) changed recently.
Is TSC a good stock to buy now? Hedge fund interest in Tristate Capital Holdings Inc (NASDAQ:TSC) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that TSC isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as SeaSpine Holdings Corp (NASDAQ:SPNE), Haverty Furniture Companies, Inc. (NYSE:HVT), and Bank of Marin Bancorp (NASDAQ:BMRC) to gather more data points.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are tons of metrics market participants use to size up stocks. A pair of the best metrics are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the top picks of the top investment managers can outpace the broader indices by a very impressive margin (see the details here).
Tom Brown of Second Curve Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, 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 real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. 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. Now let's go over the latest hedge fund action regarding Tristate Capital Holdings Inc (NASDAQ:TSC).
Do Hedge Funds Think TSC Is A Good Stock To Buy Now?
At third quarter's end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in TSC over the last 21 quarters. With the smart money's capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
Among these funds, Royce & Associates held the most valuable stake in Tristate Capital Holdings Inc (NASDAQ:TSC), which was worth $11.7 million at the end of the third quarter. On the second spot was Elizabeth Park Capital Management which amassed $4.8 million worth of shares. Second Curve Capital, D E Shaw, and GLG Partners 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 Second Curve Capital allocated the biggest weight to Tristate Capital Holdings Inc (NASDAQ:TSC), around 13.84% of its 13F portfolio. Elizabeth Park Capital Management is also relatively very bullish on the stock, earmarking 3.11 percent of its 13F equity portfolio to TSC.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Driehaus Capital. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Weld Capital Management).
Let's now take a look at hedge fund activity in other stocks similar to Tristate Capital Holdings Inc (NASDAQ:TSC). We will take a look at SeaSpine Holdings Corp (NASDAQ:SPNE), Haverty Furniture Companies, Inc. (NYSE:HVT), Bank of Marin Bancorp (NASDAQ:BMRC), HCI Group Inc (NYSE:HCI), Kaleido BioSciences, Inc. (NASDAQ:KLDO), Newtek Business Services Corp (NASDAQ:NEWT), and Hingham Institution for Savings (NASDAQ:HIFS). This group of stocks' market caps are similar to TSC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SPNE,16,51405,0 HVT,14,52327,3 BMRC,7,9987,-1 HCI,10,32195,-1 KLDO,2,8819,-5 NEWT,4,7684,-2 HIFS,1,4806,0 Average,7.7,23889,-0.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.7 hedge funds with bullish positions and the average amount invested in these stocks was $24 million. That figure was $36 million in TSC's case. SeaSpine Holdings Corp (NASDAQ:SPNE) is the most popular stock in this table. On the other hand Hingham Institution for Savings (NASDAQ:HIFS) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Tristate Capital Holdings Inc (NASDAQ:TSC) is more popular among hedge funds. Our overall hedge fund sentiment score for TSC is 85. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 30.7% in 2020 through December 14th but still managed to beat the market by 15.8 percentage points. Hedge funds were also right about betting on TSC as the stock returned 24% since the end of September (through 12/14) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
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