How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Truist Financial Corporation (NYSE:TFC).
Truist Financial Corporation (NYSE:TFC) has seen a decrease in hedge fund interest recently. Truist Financial Corporation (NYSE:TFC) was in 34 hedge funds' portfolios at the end of the third quarter of 2021. The all time high for this statistic is 45. Our calculations also showed that TFC isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Clint Carlson of Carlson Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we're going to take a gander at the latest hedge fund action regarding Truist Financial Corporation (NYSE:TFC).
Do Hedge Funds Think TFC Is A Good Stock To Buy Now?
At Q3's end, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the second quarter of 2021. Below, you can check out the change in hedge fund sentiment towards TFC over the last 25 quarters. So, let's review 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 $45.8 million call position in the stock, comprising less than 0.1%% of its 13F portfolio. On Citadel Investment Group's heels is Paul Reeder and Edward Shapiro of PAR Capital Management, with a $39.6 million position; the fund has 0.9% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions encompass Peter Seuss's Prana Capital Management, D. E. Shaw's D E Shaw and Ray Dalio's Bridgewater Associates. In terms of the portfolio weights assigned to each position Soapstone Capital allocated the biggest weight to Truist Financial Corporation (NYSE:TFC), around 6.16% of its 13F portfolio. Prana Capital Management is also relatively very bullish on the stock, setting aside 3.36 percent of its 13F equity portfolio to TFC.
Seeing as Truist Financial Corporation (NYSE:TFC) has faced a decline in interest from the entirety of the hedge funds we track, it's easy to see that there exists a select few hedgies that decided to sell off their entire stakes heading into Q4. Intriguingly, Matthew Stadelman's Diamond Hill Capital sold off the largest position of the 750 funds monitored by Insider Monkey, totaling close to $435.3 million in stock. Renaissance Technologies, also sold off its stock, about $52.6 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 5 funds heading into Q4.
Let's now take a look at hedge fund activity in other stocks similar to Truist Financial Corporation (NYSE:TFC). We will take a look at HCA Healthcare Inc (NYSE:HCA), Zoom Video Communications, Inc. (NASDAQ:ZM), Marsh & McLennan Companies, Inc. (NYSE:MMC), General Motors Company (NYSE:GM), Fidelity National Information Services Inc. (NYSE:FIS), Duke Energy Corporation (NYSE:DUK), and Crown Castle International Corp. (NYSE:CCI). This group of stocks' market caps are closest to TFC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HCA,72,3309822,12 ZM,56,6003836,-3 MMC,42,1987176,1 GM,77,6416552,-9 FIS,69,6044245,-3 DUK,32,687541,-4 CCI,45,2089073,3 Average,56.1,3791178,-0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 56.1 hedge funds with bullish positions and the average amount invested in these stocks was $3791 million. That figure was $276 million in TFC's case. General Motors Company (NYSE:GM) is the most popular stock in this table. On the other hand Duke Energy Corporation (NYSE:DUK) is the least popular one with only 32 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 24.9. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and surpassed the market again by 5.6 percentage points. Unfortunately TFC wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); TFC investors were disappointed as the stock returned 1.9% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.