Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we publish an article with the title “Recession is Imminent: We Need A Travel Ban NOW”. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on December 31st. We at Insider Monkey have made an extensive database of more than 835 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded TD Ameritrade Holding Corp. (NYSE:AMTD) based on those filings.
TD Ameritrade Holding Corp. (NYSE:AMTD) shareholders have witnessed an increase in support from the world’s most elite money managers of late. Our calculations also showed that AMTD isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the 21st century investor’s toolkit there are several signals stock traders can use to size up their holdings. Two of the less utilized signals are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the best picks of the best fund managers can outperform the S&P 500 by a superb amount (see the details here).
Matthew Halbower of Pentwater Capital
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. With all of this in mind let’s take a gander at the latest hedge fund action encompassing TD Ameritrade Holding Corp. (NYSE:AMTD).
What does smart money think about TD Ameritrade Holding Corp. (NYSE:AMTD)?
At the end of the fourth quarter, a total of 50 of the hedge funds tracked by Insider Monkey were long this stock, a change of 61% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards AMTD over the last 18 quarters. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
The largest stake in TD Ameritrade Holding Corp. (NYSE:AMTD) was held by Pentwater Capital Management, which reported holding $252.9 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $241.8 million position. Other investors bullish on the company included Magnetar Capital, Third Point, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Sand Grove Capital Partners allocated the biggest weight to TD Ameritrade Holding Corp. (NYSE:AMTD), around 6.52% of its 13F portfolio. Hunting Hill Global Capital is also relatively very bullish on the stock, designating 6.05 percent of its 13F equity portfolio to AMTD.
Now, key money managers have been driving this bullishness. Pentwater Capital Management, managed by Matthew Halbower, assembled the most valuable position in TD Ameritrade Holding Corp. (NYSE:AMTD). Pentwater Capital Management had $252.9 million invested in the company at the end of the quarter. Alec Litowitz and Ross Laser’s Magnetar Capital also initiated a $195.3 million position during the quarter. The other funds with new positions in the stock are Dan Loeb’s Third Point, Robert Emil Zoellner’s Alpine Associates, and John Orrico’s Water Island Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as TD Ameritrade Holding Corp. (NYSE:AMTD) but similarly valued. These stocks are Sun Life Financial Inc. (NYSE:SLF), Discover Financial Services (NYSE:DFS), Agilent Technologies Inc. (NYSE:A), and Parker-Hannifin Corporation (NYSE:PH). This group of stocks’ market caps resemble AMTD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SLF | 16 | 132762 | 3 |
| DFS | 39 | 830938 | -2 |
| A | 46 | 2470187 | 5 |
| PH | 39 | 971423 | 11 |
| Average | 35 | 1101328 | 4.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 35 hedge funds with bullish positions and the average amount invested in these stocks was $1101 million. That figure was $1412 million in AMTD’s case. Agilent Technologies Inc. (NYSE:A) is the most popular stock in this table. On the other hand Sun Life Financial Inc. (NYSE:SLF) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks TD Ameritrade Holding Corp. (NYSE:AMTD) is more popular among hedge funds. 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 10.1 percentage points. These stocks lost 12.9% in 2020 through March 9th and still beat the market by 1.9 percentage points. Unfortunately AMTD wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on AMTD were disappointed as the stock returned -38.4% during the first two months of 2020 (through March 9th) 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 most of these stocks already outperformed the market in Q1.
Disclosure: None. This article was originally published at Insider Monkey.
