Concerns over rising interest rates and expected further rate increases have hit several stocks hard during the fourth quarter of 2018. Trends reversed 180 degrees in 2019 amid Powell’s pivot and optimistic expectations towards a trade deal with China. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were increasing their overall exposure in the third quarter and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards Tuscan Holdings Corp. (NASDAQ:THCB).
Hedge fund interest in Tuscan Holdings Corp. (NASDAQ:THCB) shares was flat at the end of last quarter. This is usually a negative indicator. 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 GenMark Diagnostics, Inc (NASDAQ:GNMK), Dermira Inc (NASDAQ:DERM), and Hallmark Financial Services, Inc. (NASDAQ:HALL) to gather more data points. Our calculations also showed that THCB isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Michael Platt of BlueCrest Capital Mgmt.
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. Let’s analyze the fresh hedge fund action encompassing Tuscan Holdings Corp. (NASDAQ:THCB).
Hedge fund activity in Tuscan Holdings Corp. (NASDAQ:THCB)
At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards THCB over the last 17 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Noah Levy and Eugene Dozortsev’s Newtyn Management has the number one position in Tuscan Holdings Corp. (NASDAQ:THCB), worth close to $9.3 million, amounting to 0.9% of its total 13F portfolio. On Newtyn Management’s heels is BlueCrest Capital Mgmt., led by Michael Platt and William Reeves, holding a $8.1 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that are bullish include Israel Englander’s Millennium Management, Sander Gerber’s Hudson Bay Capital Management and John Thiessen’s Vertex One Asset Management. In terms of the portfolio weights assigned to each position Vertex One Asset Management allocated the biggest weight to Tuscan Holdings Corp. (NASDAQ:THCB), around 1.51% of its 13F portfolio. Newtyn Management is also relatively very bullish on the stock, earmarking 0.88 percent of its 13F equity portfolio to THCB.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s now review hedge fund activity in other stocks similar to Tuscan Holdings Corp. (NASDAQ:THCB). We will take a look at GenMark Diagnostics, Inc (NASDAQ:GNMK), Dermira Inc (NASDAQ:DERM), Hallmark Financial Services, Inc. (NASDAQ:HALL), and MediciNova, Inc. (NASDAQ:MNOV). This group of stocks’ market caps resemble THCB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GNMK | 15 | 74128 | 1 |
| DERM | 23 | 113476 | 2 |
| HALL | 12 | 40645 | 2 |
| MNOV | 2 | 3550 | -2 |
| Average | 13 | 57950 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $58 million. That figure was $55 million in THCB’s case. Dermira Inc (NASDAQ:DERM) is the most popular stock in this table. On the other hand MediciNova, Inc. (NASDAQ:MNOV) is the least popular one with only 2 bullish hedge fund positions. Tuscan Holdings Corp. (NASDAQ:THCB) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately THCB wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); THCB investors were disappointed as the stock returned 1% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
