Is TCG BDC, Inc. (NASDAQ:CGBD) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably but historically their consensus stock picks outperformed the market after adjusting for known risk factors.
Is TCG BDC, Inc. (NASDAQ:CGBD) undervalued? Investors who are in the know are betting on the stock. The number of bullish hedge fund positions advanced by 6 recently. Our calculations also showed that CGBD isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let’s analyze the fresh hedge fund action regarding TCG BDC, Inc. (NASDAQ:CGBD).
What have hedge funds been doing with TCG BDC, Inc. (NASDAQ:CGBD)?
At Q4’s end, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 150% from one quarter earlier. On the other hand, there were a total of 4 hedge funds with a bullish position in CGBD a year ago. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
The largest stake in TCG BDC, Inc. (NASDAQ:CGBD) was held by Millennium Management, which reported holding $3.2 million worth of stock at the end of December. It was followed by Arrowstreet Capital with a $2.7 million position. Other investors bullish on the company included Marshall Wace LLP, McKinley Capital Management, and Citadel Investment Group.
With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, initiated the most valuable position in TCG BDC, Inc. (NASDAQ:CGBD). Marshall Wace LLP had $2.4 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $1.6 million position during the quarter. The other funds with brand new CGBD positions are John Overdeck and David Siegel’s Two Sigma Advisors, Noam Gottesman’s GLG Partners, and Michael Gelband’s ExodusPoint Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as TCG BDC, Inc. (NASDAQ:CGBD) but similarly valued. We will take a look at Winnebago Industries, Inc. (NYSE:WGO), Verso Corporation (NYSE:VRS), QAD Inc. (NASDAQ:QADA), and Unit Corporation (NYSE:UNT). This group of stocks’ market values are similar to CGBD’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WGO | 15 | 79269 | -2 |
| VRS | 22 | 153046 | 0 |
| QADA | 17 | 122206 | 1 |
| UNT | 15 | 9318 | 5 |
| Average | 17.25 | 90960 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $91 million. That figure was $13 million in CGBD’s case. Verso Corporation (NYSE:VRS) is the most popular stock in this table. On the other hand Winnebago Industries, Inc. (NYSE:WGO) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks TCG BDC, Inc. (NASDAQ:CGBD) is even less popular than WGO. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on CGBD, though not to the same extent, as the stock returned 22.4% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.