Hedge funds and other investment firms run by legendary investors like Israel Englander, Jeffrey Talpins and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
Hedge fund interest in TPG Specialty Lending Inc (NYSE:TSLX) shares was flat at the end of last quarter. This is usually a negative indicator. 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 McDermott International, Inc. (NYSE:MDR), Kite Realty Group Trust (NYSE:KRG), and AtriCure Inc. (NASDAQ:ATRC) to gather more data points.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to take a peek at the key hedge fund action encompassing TPG Specialty Lending Inc (NYSE:TSLX).
What does the smart money think about TPG Specialty Lending Inc (NYSE:TSLX)?
At the end of the fourth quarter, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 15 hedge funds held shares or bullish call options in TSLX a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Clough Capital Partners was the largest shareholder of TPG Specialty Lending Inc (NYSE:TSLX), with a stake worth $13.5 million reported as of the end of December. Trailing Clough Capital Partners was Millennium Management, which amassed a stake valued at $10.2 million. Gillson Capital, McKinley Capital Management, and D E Shaw were also very fond of the stock, giving the stock large weights in their portfolios.
Because TPG Specialty Lending Inc (NYSE:TSLX) has witnessed declining sentiment from the aggregate hedge fund industry, logic holds that there is a sect of hedge funds that decided to sell off their positions entirely by the end of the third quarter. At the top of the heap, John Overdeck and David Siegel’s Two Sigma Advisors dumped the biggest position of the “upper crust” of funds followed by Insider Monkey, worth close to $1.1 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund dropped about $0.4 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as TPG Specialty Lending Inc (NYSE:TSLX) but similarly valued. These stocks are McDermott International, Inc. (NYSE:MDR), Kite Realty Group Trust (NYSE:KRG), AtriCure Inc. (NASDAQ:ATRC), and Kinsale Capital Group, Inc. (NASDAQ:KNSL). All of these stocks’ market caps resemble TSLX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MDR | 23 | 163462 | -1 |
| KRG | 7 | 25452 | -6 |
| ATRC | 22 | 163677 | 0 |
| KNSL | 12 | 19430 | 7 |
| Average | 16 | 93005 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $93 million. That figure was $39 million in TSLX’s case. McDermott International, Inc. (NYSE:MDR) is the most popular stock in this table. On the other hand Kite Realty Group Trust (NYSE:KRG) is the least popular one with only 7 bullish hedge fund positions. TPG Specialty Lending Inc (NYSE:TSLX) 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately TSLX wasn’t nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); TSLX investors were disappointed as the stock returned 14% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
