Hedge Funds Are Betting On TD Ameritrade Holding Corp. (AMTD)

Is TD Ameritrade Holding Corp. (NYSE:AMTD) undervalued? Hedge funds are getting more bullish. The number of long hedge fund bets rose by 2 recently.

To most shareholders, hedge funds are seen as slow, old financial vehicles of yesteryear. While there are greater than 8000 funds with their doors open today, we at Insider Monkey hone in on the leaders of this club, around 450 funds. It is widely believed that this group has its hands on the lion’s share of all hedge funds’ total capital, and by tracking their top stock picks, we have figured out a few investment strategies that have historically beaten the S&P 500 index. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have beaten the S&P 500 index by 23.3 percentage points in 8 months (check out a sample of our picks).

Equally as beneficial, bullish insider trading activity is another way to break down the world of equities. There are a number of reasons for a corporate insider to downsize shares of his or her company, but just one, very obvious reason why they would behave bullishly. Many academic studies have demonstrated the impressive potential of this strategy if piggybackers understand what to do (learn more here).

With all of this in mind, it’s important to take a gander at the recent action encompassing TD Ameritrade Holding Corp. (NYSE:AMTD).

How have hedgies been trading TD Ameritrade Holding Corp. (NYSE:AMTD)?

In preparation for this quarter, a total of 18 of the hedge funds we track were long in this stock, a change of 13% from the first quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their stakes substantially.

According to our comprehensive database, Robert Joseph Caruso’s Select Equity Group had the biggest call position in TD Ameritrade Holding Corp. (NYSE:AMTD), worth close to $248.6 million, accounting for 3.3% of its total 13F portfolio. Sitting at the No. 2 spot is Select Equity Group, managed by Robert Joseph Caruso, which held a $93.8 million position; the fund has 1.2% of its 13F portfolio invested in the stock. Other hedge funds that hold long positions include Ken Griffin’s Citadel Investment Group, Charles Akre’s Akre Capital Management and Wojciech Uzdelewicz’s Espalier Global Management.

As industrywide interest jumped, some big names were breaking ground themselves. Select Equity Group, managed by Robert Joseph Caruso, initiated the most valuable call position in TD Ameritrade Holding Corp. (NYSE:AMTD). Select Equity Group had 248.6 million invested in the company at the end of the quarter. Robert Joseph Caruso’s Select Equity Group also initiated a $93.8 million position during the quarter. The other funds with brand new AMTD positions are Donald Chiboucis’s Columbus Circle Investors, D. E. Shaw’s D E Shaw, and Steven Cohen’s SAC Capital Advisors.

How are insiders trading TD Ameritrade Holding Corp. (NYSE:AMTD)?

Insider trading activity, especially when it’s bullish, is best served when the company in focus has experienced transactions within the past half-year. Over the last six-month time frame, TD Ameritrade Holding Corp. (NYSE:AMTD) has experienced 2 unique insiders buying, and 7 insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to TD Ameritrade Holding Corp. (NYSE:AMTD). These stocks are E TRADE Financial Corporation (NASDAQ:ETFC), LPL Financial Holdings Inc (NASDAQ:LPLA), Nomura Holdings, Inc. (ADR) (NYSE:NMR), Charles Schwab Corp (NYSE:SCHW), and CME Group Inc (NASDAQ:CME). This group of stocks are in the investment brokerage – national industry and their market caps resemble AMTD’s market cap.

With the returns shown by Insider Monkey’s time-tested strategies, retail investors must always watch hedge fund and insider trading activity, and TD Ameritrade Holding Corp. (NYSE:AMTD) is no exception.

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