Is Tuscan Holdings Corp. II (NASDAQ:THCA) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is Tuscan Holdings Corp. II (NASDAQ:THCA) the right investment to pursue these days? Money managers are taking an optimistic view. The number of long hedge fund positions inched up by 9 lately. Our calculations also showed that THCA 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.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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. 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 also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a glance at the recent hedge fund action regarding Tuscan Holdings Corp. II (NASDAQ:THCA).
How have hedgies been trading Tuscan Holdings Corp. II (NASDAQ:THCA)?
At the end of the third quarter, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 9 from the previous quarter. The graph below displays the number of hedge funds with bullish position in THCA over the last 17 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Newtyn Management was the largest shareholder of Tuscan Holdings Corp. II (NASDAQ:THCA), with a stake worth $7.4 million reported as of the end of September. Trailing Newtyn Management was BlueCrest Capital Mgmt., which amassed a stake valued at $6.1 million. Vertex One Asset Management, Bulldog Investors, and D E Shaw were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Bulldog Investors allocated the biggest weight to Tuscan Holdings Corp. II (NASDAQ:THCA), around 1.59% of its 13F portfolio. Vertex One Asset Management is also relatively very bullish on the stock, setting aside 1.56 percent of its 13F equity portfolio to THCA.
As one would reasonably expect, some big names were breaking ground themselves. Newtyn Management, managed by Noah Levy and Eugene Dozortsev, initiated the largest position in Tuscan Holdings Corp. II (NASDAQ:THCA). Newtyn Management had $7.4 million invested in the company at the end of the quarter. Michael Platt and William Reeves’s BlueCrest Capital Mgmt. also made a $6.1 million investment in the stock during the quarter. The other funds with new positions in the stock are John Thiessen’s Vertex One Asset Management, Phillip Goldstein, Andrew Dakos and Steven Samuels’s Bulldog Investors, and David E. Shaw’s D E Shaw.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Tuscan Holdings Corp. II (NASDAQ:THCA) but similarly valued. We will take a look at Saratoga Investment Corp (NYSE:SAR), Castle Brands Inc (NYSE:ROX), Civeo Corporation (Canada) (NYSE:CVEO), and Clovis Oncology Inc (NASDAQ:CLVS). This group of stocks’ market values resemble THCA’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SAR | 5 | 6996 | 3 |
| ROX | 9 | 8244 | 5 |
| CVEO | 13 | 84856 | 0 |
| CLVS | 20 | 64849 | -4 |
| Average | 11.75 | 41236 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $41 million. That figure was $31 million in THCA’s case. Clovis Oncology Inc (NASDAQ:CLVS) is the most popular stock in this table. On the other hand Saratoga Investment Corp (NYSE:SAR) is the least popular one with only 5 bullish hedge fund positions. Tuscan Holdings Corp. II (NASDAQ:THCA) 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 THCA wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); THCA investors were disappointed as the stock returned -0.2% 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.