Capital One Financial Corp. (COF): Are Hedge Funds Right About This Stock?

Is Capital One Financial Corp. (NYSE:COF) ready to rally soon? Money managers are getting less optimistic. The number of bullish hedge fund positions shrunk by 4 lately.

In the financial world, there are tons of methods investors can use to monitor stocks. Some of the most underrated are hedge fund and insider trading movement. At Insider Monkey, our studies have shown that, historically, those who follow the top picks of the best hedge fund managers can outpace the S&P 500 by a solid margin (see just how much).

Just as important, positive insider trading activity is another way to parse down the investments you’re interested in. Just as you’d expect, there are a variety of stimuli for an upper level exec to sell shares of his or her company, but only one, very clear reason why they would initiate a purchase. Many academic studies have demonstrated the impressive potential of this method if piggybackers understand where to look (learn more here).

With these “truths” under our belt, it’s important to take a peek at the recent action surrounding Capital One Financial Corp. (NYSE:COF).

How are hedge funds trading Capital One Financial Corp. (NYSE:COF)?

At the end of the first quarter, a total of 58 of the hedge funds we track were long in this stock, a change of -6% from the fourth quarter. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their stakes substantially.

When looking at the hedgies we track, Viking Global, managed by Andreas Halvorsen, holds the biggest position in Capital One Financial Corp. (NYSE:COF). Viking Global has a $595.3 million position in the stock, comprising 3.6% of its 13F portfolio. The second largest stake is held by Lone Pine Capital, managed by Stephen Mandel, which held a $279.1 million position; 1.4% of its 13F portfolio is allocated to the stock. Other peers that are bullish include Lee Ainslie’s Maverick Capital, Rob Citrone’s Discovery Capital Management and Thomas E. Claugus’s GMT Capital.

Judging by the fact that Capital One Financial Corp. (NYSE:COF) has experienced a declination in interest from the smart money, it’s easy to see that there were a few funds who sold off their positions entirely in Q1. At the top of the heap, Donald Chiboucis’s Columbus Circle Investors dumped the largest position of the 450+ funds we key on, comprising an estimated $212.9 million in stock., and George Soros of Soros Fund Management was right behind this move, as the fund cut about $73 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 4 funds in Q1.

Insider trading activity in Capital One Financial Corp. (NYSE:COF)

Insider purchases made by high-level executives is at its handiest when the company we’re looking at has seen transactions within the past half-year. Over the latest half-year time period, Capital One Financial Corp. (NYSE:COF) has experienced 2 unique insiders purchasing, and 6 insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to Capital One Financial Corp. (NYSE:COF). These stocks are CIT Group Inc. (NYSE:CIT), SLM Corp (NASDAQ:SLM), American Express Company (NYSE:AXP) and Discover Financial Services (NYSE:DFS). This group of stocks are in the credit services industry and their market caps are similar to COF’s market cap.

With the results shown by our time-tested strategies, everyday investors must always keep an eye on hedge fund and insider trading sentiment, and Capital One Financial Corp. (NYSE:COF) applies perfectly to this mantra.

Click here to learn why you should track hedge funds