In this article we will check out the progression of hedge fund sentiment towards TD Ameritrade Holding Corp. (NYSE:AMTD) and determine whether it is a good investment 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.
TD Ameritrade Holding Corp. (NYSE:AMTD) was in 46 hedge funds’ portfolios at the end of the first quarter of 2020. AMTD investors should pay attention to a decrease in activity from the world’s largest hedge funds lately. There were 50 hedge funds in our database with AMTD holdings at the end of the previous quarter. Our calculations also showed that AMTD isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: 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 a select group of hedge fund holdings outperformed the S&P 500 ETFs by 44 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Matthew Halbower of Pentwater Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this successful trader’s “corona catalyst plays“. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a gander at the key hedge fund action regarding TD Ameritrade Holding Corp. (NYSE:AMTD).
Hedge fund activity in TD Ameritrade Holding Corp. (NYSE:AMTD)
At Q1’s end, a total of 46 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from the fourth quarter of 2019. By comparison, 30 hedge funds held shares or bullish call options in AMTD a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in TD Ameritrade Holding Corp. (NYSE:AMTD) was held by Pentwater Capital Management, which reported holding $206.5 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $199.9 million position. Other investors bullish on the company included Magnetar Capital, Water Island Capital, and Alpine Associates. In terms of the portfolio weights assigned to each position Jet Capital Investors allocated the biggest weight to TD Ameritrade Holding Corp. (NYSE:AMTD), around 7.71% of its 13F portfolio. Water Island Capital is also relatively very bullish on the stock, setting aside 6.57 percent of its 13F equity portfolio to AMTD.
Because TD Ameritrade Holding Corp. (NYSE:AMTD) has experienced falling interest from the entirety of the hedge funds we track, it’s safe to say that there exists a select few hedgies who were dropping their full holdings in the third quarter. Interestingly, Dan Loeb’s Third Point sold off the largest position of all the hedgies monitored by Insider Monkey, comprising close to $149.1 million in stock, and Adam Guren’s Hunting Hill Global Capital was right behind this move, as the fund cut about $27 million worth. These moves are interesting, as total hedge fund interest fell by 4 funds in the third quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as TD Ameritrade Holding Corp. (NYSE:AMTD) but similarly valued. We will take a look at Entergy Corporation (NYSE:ETR), McCormick & Company, Incorporated (NYSE:MKC), Schlumberger Limited. (NYSE:SLB), and Match Group, Inc. (NASDAQ:MTCH). This group of stocks’ market values are similar to AMTD’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ETR | 34 | 1036847 | 3 |
| MKC | 31 | 280968 | 7 |
| SLB | 49 | 641144 | 2 |
| MTCH | 38 | 1032869 | 6 |
| Average | 38 | 747957 | 4.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 38 hedge funds with bullish positions and the average amount invested in these stocks was $748 million. That figure was $1250 million in AMTD’s case. Schlumberger Limited. (NYSE:SLB) is the most popular stock in this table. On the other hand McCormick & Company, Incorporated (NYSE:MKC) is the least popular one with only 31 bullish hedge fund positions. TD Ameritrade Holding Corp. (NYSE:AMTD) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd but beat the market by 15.6 percentage points. Unfortunately AMTD wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on AMTD were disappointed as the stock returned -0.9% 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.
