Here is What Hedge Funds Think About Community Financial Corp (TCFC)

Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The time period between June 25 and the end of October was one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 14 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Community Financial Corp (NASDAQ:TCFC).

Community Financial Corp (NASDAQ:TCFC) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 4 hedge funds’ portfolios at the end of September. It might come as a surprise, considering that the shares of Community Financial Corp (NASDAQ:TCFC) gained 9.3% value during the quarter.

The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article, we will examine companies such as Neothetics Inc (NASDAQ:NEOT), Amber Road Inc (NYSE:AMBR), and Alaska Communications Systems Group Inc (NASDAQ:ALSK) to gather more data points.

To the average investor, there are dozens of signals market participants have at their disposal to evaluate stocks. A duo of the most under-the-radar signals are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the best picks of the elite hedge fund managers can beat the broader indices by a solid amount (see the details here).

With all of this in mind, let’s go over the fresh action encompassing Community Financial Corp (NASDAQ:TCFC).

How are hedge funds trading Community Financial Corp (NASDAQ:TCFC)?

At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, unchanged from one quarter earlier. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Matthew Lindenbaum’s Basswood Capital has the largest position in Community Financial Corp (NASDAQ:TCFC), worth close to $10.7 million, comprising 0.5% of its total 13F portfolio. The second largest stake is held by EJF Capital, led by Emanuel J. Friedman, holding a $6.9 million position; 0.3% of its 13F portfolio is allocated to the stock. Remaining peers that are bullish contain Neil Chriss’ Hutchin Hill Capital, and Jeffrey Gendell’s Tontine Asset Management.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Community Financial Corp (NASDAQ:TCFC) but similarly valued. We will take a look at Neothetics Inc (NASDAQ:NEOT), Amber Road Inc (NYSE:AMBR), Alaska Communications Systems Group Inc (NASDAQ:ALSK), and ASB Bancorp Inc (NASDAQ:ASBB). This group of stocks’ market caps match Community Financial Corp (NASDAQ:TCFC)’s market cap.

As you can see, these stocks had an average of 5 hedge funds with bullish positions and the average amount invested in these stocks was $9 million. That figure was $19 million in Community Financial Corp (NASDAQ:TCFC)’s case. Amber Road Inc (NYSE:AMBR) is the most popular stock in this table. On the other hand, Neothetics Inc (NASDAQ:NEOT) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks, Community Financial Corp (NASDAQ:TCFC) is even less popular than Neothetics Inc (NASDAQ:NEOT). Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case, more research is warranted.