In this article you are going to find out whether hedge funds think Truist Financial Corporation (NYSE:TFC) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Truist Financial Corporation (NYSE:TFC) shareholders have witnessed a decrease in hedge fund sentiment recently. Truist Financial Corporation (NYSE:TFC) was in 33 hedge funds’ portfolios at the end of June. The all time high for this statistics is 45. There were 34 hedge funds in our database with TFC positions at the end of the first quarter. Our calculations also showed that TFC isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Robert Atchinson of Adage Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Last week, most investors overlooked a major development because of the presidential elections: Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 biggest telecom companies to identify fast growing companies in various industries. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keeping this in mind let’s take a glance at the fresh hedge fund action regarding Truist Financial Corporation (NYSE:TFC).
What does smart money think about Truist Financial Corporation (NYSE:TFC)?
At second quarter’s end, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from the previous quarter. By comparison, 31 hedge funds held shares or bullish call options in TFC a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Citadel Investment Group, managed by Ken Griffin, holds the number one position in Truist Financial Corporation (NYSE:TFC). Citadel Investment Group has a $52.9 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is Adage Capital Management, managed by Phill Gross and Robert Atchinson, which holds a $45.8 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions comprise Clint Carlson’s Carlson Capital, Daniel Johnson’s Gillson Capital and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Gillson Capital allocated the biggest weight to Truist Financial Corporation (NYSE:TFC), around 4.85% of its 13F portfolio. Soapstone Capital is also relatively very bullish on the stock, dishing out 2.16 percent of its 13F equity portfolio to TFC.
Due to the fact that Truist Financial Corporation (NYSE:TFC) has faced bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there were a few hedgies who were dropping their positions entirely heading into Q3. Interestingly, Dmitry Balyasny’s Balyasny Asset Management dropped the largest stake of the “upper crust” of funds monitored by Insider Monkey, valued at close to $41 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also said goodbye to its stock, about $27.9 million worth. These transactions are important to note, as total hedge fund interest dropped by 1 funds heading into Q3.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Truist Financial Corporation (NYSE:TFC) but similarly valued. We will take a look at CNOOC Limited (NYSE:CEO), Boston Scientific Corporation (NYSE:BSX), Intercontinental Exchange Inc (NYSE:ICE), The Bank of Nova Scotia (NYSE:BNS), Newmont Corporation (NYSE:NEM), Deere & Company (NYSE:DE), and Mercadolibre Inc (NASDAQ:MELI). This group of stocks’ market caps are closest to TFC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CEO | 13 | 166646 | 2 |
| BSX | 66 | 2312667 | 7 |
| ICE | 60 | 2754652 | -1 |
| BNS | 13 | 252173 | 1 |
| NEM | 55 | 2418239 | 12 |
| DE | 32 | 839882 | -12 |
| MELI | 60 | 4427510 | 0 |
| Average | 42.7 | 1881681 | 1.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 42.7 hedge funds with bullish positions and the average amount invested in these stocks was $1882 million. That figure was $288 million in TFC’s case. Boston Scientific Corporation (NYSE:BSX) is the most popular stock in this table. On the other hand CNOOC Limited (NYSE:CEO) is the least popular one with only 13 bullish hedge fund positions. Truist Financial Corporation (NYSE:TFC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TFC is 44.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 23% in 2020 through October 30th and still beat the market by 20.1 percentage points. A small number of hedge funds were also right about betting on TFC as the stock returned 13.4% since the end of the second quarter (through 10/30) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
