Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Tristate Capital Holdings Inc (NASDAQ:TSC)? The smart money sentiment can provide an answer to this question.
Is Tristate Capital Holdings Inc (NASDAQ:TSC) worth your attention right now? Money managers are in a pessimistic mood. The number of bullish hedge fund positions were trimmed by 1 in recent months. Our calculations also showed that TSC isn’t among the 30 most popular stocks among hedge funds.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
Let’s take a peek at the latest hedge fund action encompassing Tristate Capital Holdings Inc (NASDAQ:TSC).
How have hedgies been trading Tristate Capital Holdings Inc (NASDAQ:TSC)?
At Q1’s end, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TSC over the last 15 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Chuck Royce’s Royce & Associates has the largest position in Tristate Capital Holdings Inc (NASDAQ:TSC), worth close to $16.6 million, corresponding to 0.1% of its total 13F portfolio. The second most bullish fund manager is Tom Brown of Second Curve Capital, with a $16 million position; the fund has 12.2% of its 13F portfolio invested in the stock. Other peers that hold long positions comprise Jim Simons’s Renaissance Technologies, Paul Marshall and Ian Wace’s Marshall Wace LLP and Richard Driehaus’s Driehaus Capital.
Seeing as Tristate Capital Holdings Inc (NASDAQ:TSC) has witnessed bearish sentiment from the aggregate hedge fund industry, logic holds that there was a specific group of money managers that slashed their positions entirely last quarter. At the top of the heap, David Harding’s Winton Capital Management cut the biggest stake of the 700 funds monitored by Insider Monkey, totaling about $0.3 million in stock, and Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital was right behind this move, as the fund cut about $0.1 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 1 funds last quarter.
Let’s check out hedge fund activity in other stocks similar to Tristate Capital Holdings Inc (NASDAQ:TSC). These stocks are ProQR Therapeutics NV (NASDAQ:PRQR), Vivint Solar Inc (NYSE:VSLR), Unisys Corporation (NYSE:UIS), and CEVA, Inc. (NASDAQ:CEVA). This group of stocks’ market caps resemble TSC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PRQR | 10 | 106417 | -1 |
| VSLR | 11 | 23343 | -5 |
| UIS | 19 | 77897 | 2 |
| CEVA | 10 | 30237 | 0 |
| Average | 12.5 | 59474 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $59 million. That figure was $54 million in TSC’s case. Unisys Corporation (NYSE:UIS) is the most popular stock in this table. On the other hand ProQR Therapeutics NV (NASDAQ:PRQR) is the least popular one with only 10 bullish hedge fund positions. Tristate Capital Holdings Inc (NASDAQ:TSC) 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Hedge funds were also right about betting on TSC, though not to the same extent, as the stock returned 4% during the same time frame and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
