Hedge Funds Are Betting On TFS Financial Corporation (TFSL)

After several tireless days we have finished crunching the numbers from the more than 700 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of September 30. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards TFS Financial Corporation (NASDAQ:TFSL).

TFS Financial Corporation (NASDAQ:TFSL) investors should be aware of an increase in support from the world’s most elite money managers of late. TFSL was in 14 hedge funds’ portfolios at the end of the third quarter of 2015. There were 13 hedge funds in our database with TFSL holdings at the end of the previous quarter. 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 Herbalife Ltd. (NYSE:HLF), Gol Linhas Aereas Inteligentes SA (ADR) (NYSE:GOL), and KAR Auction Services Inc (NYSE:KAR) to gather more data points.

To the average investor there are a multitude of formulas market participants use to evaluate stocks. A duo of the less utilized formulas are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the top picks of the best fund managers can beat the broader indices by a very impressive margin (see the details here).

Keeping this in mind, let’s take a look at the latest action regarding TFS Financial Corporation (NASDAQ:TFSL).

What have hedge funds been doing with TFS Financial Corporation (NASDAQ:TFSL)?

Heading into Q4, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the second quarter. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Jim Simons’s Renaissance Technologies has the largest position in TFS Financial Corporation (NASDAQ:TFSL), worth close to $87 million, amounting to 0.2% of its total 13F portfolio. Coming in second is Michael A. Price and Amos Meron of Empyrean Capital Partners, with an $64.6 million position; the fund has 3.2% of its 13F portfolio invested in the stock. Other peers that hold long positions include Emanuel J. Friedman’s EJF Capital, Paul Orlin and Alex Porter’s Amici Capital and Howard Guberman’s Gruss Asset Management.

As aggregate interest increased, key money managers have jumped into TFS Financial Corporation (NASDAQ:TFSL) headfirst. AQR Capital Management, managed by Cliff Asness, initiated the largest position in TFS Financial Corporation (NASDAQ:TFSL). AQR Capital Management had $0.9 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also initiated an $0.5 million position during the quarter. The only other fund with a brand new TFSL position is Peter Muller’s PDT Partners.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as TFS Financial Corporation (NASDAQ:TFSL) but similarly valued. We will take a look at Herbalife Ltd. (NYSE:HLF), Gol Linhas Aereas Inteligentes SA (ADR) (NYSE:GOL), KAR Auction Services Inc (NYSE:KAR), and Panera Bread Co (NASDAQ:PNRA). All of these stocks’ market caps match TFSL’s market cap.

As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $903 million, which is significantly higher than the $229 million in TFSL’s case. KAR Auction Services Inc (NYSE:KAR) is the most popular stock in this table, while Gol Linhas Aereas Inteligentes SA (ADR) (NYSE:GOL) is the least popular one with only 5 bullish hedge fund positions. TFS Financial Corporation (NASDAQ:TFSL) 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. In this regard KAR might be a better candidate to consider a long position.