“The global economic environment is very favorable for investors. Economies are generally strong, but not too strong. Employment levels are among the strongest for many decades. Interest rates are paused at very low levels, and the risk of significant increases in the medium term seems low. Financing for transactions is freely available to good borrowers, but not in major excess. Covenants are lighter than they were five years ago, but the extreme excesses seen in the past do not seem prevalent yet today. Despite this apparent ‘goldilocks’ market environment, we continue to worry about a world where politics are polarized almost everywhere, interest rates are low globally, and equity valuations are at their peak,” are the words of Brookfield Asset Management. Brookfield was right about politics as stocks experienced their second worst May since the 1960s due to escalation of trade disputes. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards TD Ameritrade Holding Corp. (NASDAQ:AMTD) and see how it was affected.
TD Ameritrade Holding Corp. (NASDAQ:AMTD) was in 30 hedge funds’ portfolios at the end of March. AMTD has seen an increase in activity from the world’s largest hedge funds in recent months. There were 17 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.
At the moment there are a large number of tools stock market investors employ to grade publicly traded companies. A pair of the most under-the-radar tools are hedge fund and insider trading signals. We have shown that, historically, those who follow the top picks of the top hedge fund managers can outperform their index-focused peers by a very impressive margin (see the details here).
We’re going to take a look at the latest hedge fund action encompassing TD Ameritrade Holding Corp. (NASDAQ:AMTD).
What have hedge funds been doing with TD Ameritrade Holding Corp. (NASDAQ:AMTD)?
At Q1’s end, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 76% from the previous quarter. On the other hand, there were a total of 21 hedge funds with a bullish position in AMTD a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
More specifically, Akre Capital Management was the largest shareholder of TD Ameritrade Holding Corp. (NASDAQ:AMTD), with a stake worth $167.5 million reported as of the end of March. Trailing Akre Capital Management was Citadel Investment Group, which amassed a stake valued at $55.7 million. Crescent Park Management, Arrowstreet Capital, and Bridgewater Associates were also very fond of the stock, giving the stock large weights in their portfolios.
Now, key money managers have been driving this bullishness. Bridgewater Associates, managed by Ray Dalio, initiated the biggest position in TD Ameritrade Holding Corp. (NASDAQ:AMTD). Bridgewater Associates had $28.7 million invested in the company at the end of the quarter. Peter Seuss’s Prana Capital Management also initiated a $3.9 million position during the quarter. The other funds with new positions in the stock are Paul Tudor Jones’s Tudor Investment Corp, Michael Gelband’s ExodusPoint Capital, and Jeffrey Talpins’s Element Capital Management.
Let’s check out hedge fund activity in other stocks similar to TD Ameritrade Holding Corp. (NASDAQ:AMTD). These stocks are Equity Residential (NYSE:EQR), AvalonBay Communities Inc (NYSE:AVB), Advanced Micro Devices, Inc. (NASDAQ:AMD), and Chunghwa Telecom Co., Ltd (NYSE:CHT). This group of stocks’ market valuations are closest to AMTD’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EQR | 22 | 250768 | -1 |
| AVB | 26 | 851272 | -1 |
| AMD | 37 | 980467 | 9 |
| CHT | 4 | 119722 | 2 |
| Average | 22.25 | 550557 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.25 hedge funds with bullish positions and the average amount invested in these stocks was $551 million. That figure was $434 million in AMTD’s case. Advanced Micro Devices, Inc. (NASDAQ:AMD) is the most popular stock in this table. On the other hand Chunghwa Telecom Co., Ltd (NYSE:CHT) is the least popular one with only 4 bullish hedge fund positions. TD Ameritrade Holding Corp. (NASDAQ:AMTD) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on AMTD as the stock returned 2% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
