The Brazilian real has fallen by more than 2% today, which in turn has shaken the shares of Brazilian commercial bank Banco Bradesco SA (ADR) (NYSE:BBD), which is down by 5.63% on the NYSE today. The chain reaction started earlier today after two key officials in the country’s political and financial affairs were arrested on charges of obstructing an investigation into the country’s wide-spread corruption, which has crippled the stocks of other Brazilian-based companies like Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) this year (Petroleo is also down by more than 5% today). With Banco Bradesco SA (ADR) (NYSE:BBD) now down by nearly 57% this year and paying a monthly dividend with a yield of 6.08%, is it a good time to buy the stock on weakness? Let’s look to recent smart money moves in the stock to try and find the answer.
Banco Bradesco SA (ADR) (NYSE:BBD) has experienced a decrease in support from the world’s most elite money managers in recent months. Banco Bradesco SA (ADR) (NYSE:BBD) was in 11 hedge funds’ portfolios at the end of the third quarter of 2015. There were 15 hedge funds in our database with Banco Bradesco SA (ADR) (NYSE:BBD) holdings at the end of the previous quarter. 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 Imperial Oil Limited (USA) (NYSEAMEX:IMO), Humana Inc (NYSE:HUM), and CSX Corporation (NYSE:CSX) to gather more data points.
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In the eyes of most traders, hedge funds are perceived as slow, outdated investment tools of years past. While there are more than 8,000 funds trading at present, our experts look at the leaders of this club, around 700 funds. Most estimates calculate that this group of people direct the lion’s share of all hedge funds’ total asset base, and by monitoring their first-class investments, Insider Monkey has figured out various investment strategies that have historically surpassed the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy defeated the S&P 500 index by 12 percentage points annually for a decade in their back tests.
Keeping this in mind, we’re going to take a gander at the fresh action surrounding Banco Bradesco SA (ADR) (NYSE:BBD).
What have hedge funds been doing with Banco Bradesco SA (ADR) (NYSE:BBD)?
Heading into Q4, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a 27% slide from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Cliff Asness’ AQR Capital Management has the most valuable position in Banco Bradesco SA (ADR) (NYSE:BBD), worth close to $54.6 million, corresponding to 0.1% of its total 13F portfolio. The second-most bullish fund manager is Renaissance Technologies, with a $27.7 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining members of the smart money that hold long positions encompass D E Shaw, Israel Englander’s Millennium Management, and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Due to the fact that Banco Bradesco SA (ADR) (NYSE:BBD) has experienced declining sentiment from the smart money, we can see that there was a specific group of hedge funds that slashed their full holdings in the third quarter. It’s worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital cut the largest position of the 700 funds monitored by Insider Monkey, totaling close to $57.4 million in stock, and Alexander Mitchell’s Scopus Asset Management was right behind this move, as the fund sold off about $4.5 million worth of shares. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 4 funds in the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Banco Bradesco SA (ADR) (NYSE:BBD) but similarly valued. These stocks are Imperial Oil Limited (USA) (NYSEAMEX:IMO), Humana Inc (NYSE:HUM), CSX Corporation (NYSE:CSX), and Crown Castle International Corp. (NYSE:CCI). All of these stocks’ market caps match Banco Bradesco SA (ADR) (NYSE:BBD)’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IMO | 9 | 76127 | -2 |
| HUM | 56 | 4290176 | -28 |
| CSX | 47 | 1390764 | -1 |
| CCI | 46 | 1865337 | -2 |
As you can see these stocks had an average of 39.5 hedge funds with bullish positions and the average amount invested in these stocks was $1.91 billion. That figure was $146 million in Banco Bradesco SA (ADR) (NYSE:BBD)’s case. Humana Inc (NYSE:HUM) is the most popular stock in this table. On the other hand Imperial Oil Limited (USA) (NYSEAMEX:IMO) is the least popular one with only 9 bullish hedge fund positions. Banco Bradesco SA (ADR) (NYSE:BBD) is not the least popular stock in this group but hedge fund interest is still well below average compared to the rest of its market cap peers. This is a negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard Humana might be a better candidate to consider a long position.
