Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published 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. Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 835 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Truist Financial Corporation (NYSE:TFC) in this article.
Truist Financial Corporation (NYSE:TFC) has seen an increase in activity from the world’s largest hedge funds recently. TFC was in 35 hedge funds’ portfolios at the end of December. There were 31 hedge funds in our database with TFC holdings at the end of the previous quarter. Our calculations also showed that TFC 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.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ken Griffin of Citadel Investment Group
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. Keeping this in mind let’s check out the key hedge fund action encompassing Truist Financial Corporation (NYSE:TFC).
How are hedge funds trading Truist Financial Corporation (NYSE:TFC)?
At Q4’s end, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from one quarter earlier. By comparison, 34 hedge funds held shares or bullish call options in TFC a year ago. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
Among these funds, Citadel Investment Group held the most valuable stake in Truist Financial Corporation (NYSE:TFC), which was worth $327.5 million at the end of the third quarter. On the second spot was Two Sigma Advisors which amassed $93.1 million worth of shares. Adage Capital Management, Sirios Capital Management, and Gillson Capital 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 Gillson Capital allocated the biggest weight to Truist Financial Corporation (NYSE:TFC), around 4.86% of its 13F portfolio. Sirios Capital Management is also relatively very bullish on the stock, earmarking 4.4 percent of its 13F equity portfolio to TFC.
As aggregate interest increased, key money managers were breaking ground themselves. Citadel Investment Group, managed by Ken Griffin, initiated the largest position in Truist Financial Corporation (NYSE:TFC). Citadel Investment Group had $327.5 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also made a $93.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Phill Gross and Robert Atchinson’s Adage Capital Management, John Brennan’s Sirios Capital Management, and Daniel Johnson’s Gillson Capital.
Let’s now take a look at hedge fund activity in other stocks similar to Truist Financial Corporation (NYSE:TFC). We will take a look at Tesla Inc. (NASDAQ:TSLA), CNOOC Limited (NYSE:CEO), The Estee Lauder Companies Inc (NYSE:EL), and Automatic Data Processing (NASDAQ:ADP). All of these stocks’ market caps resemble TFC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TSLA | 51 | 3043687 | 19 |
| CEO | 14 | 235359 | -1 |
| EL | 50 | 1697103 | 2 |
| ADP | 51 | 2821795 | -5 |
| Average | 41.5 | 1949486 | 3.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 41.5 hedge funds with bullish positions and the average amount invested in these stocks was $1949 million. That figure was $876 million in TFC’s case. Tesla Inc. (NASDAQ:TSLA) is the most popular stock in this table. On the other hand CNOOC Limited (NYSE:CEO) is the least popular one with only 14 bullish hedge fund positions. Truist Financial Corporation (NYSE:TFC) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but beat the market by 3.1 percentage points. Unfortunately TFC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); TFC investors were disappointed as the stock returned -39.7% during the same time period 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.