Capital One Financial Corp. (COF) Fell Out Of Favor With Hedge Funds

The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Capital One Financial Corp. (NYSE:COF).

Capital One Financial Corp. (NYSE:COF) was in 55 hedge funds’ portfolios at the end of September. The all time high for this statistic is 64. COF investors should pay attention to a decrease in activity from the world’s largest hedge funds recently. There were 64 hedge funds in our database with COF positions at the end of the second quarter. Our calculations also showed that COF isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

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 peek at the fresh hedge fund action encompassing Capital One Financial Corp. (NYSE:COF).

Alec Litowitz of Magnetar Capital

Do Hedge Funds Think COF Is A Good Stock To Buy Now?

At the end of the third quarter, a total of 55 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the second quarter of 2021. By comparison, 42 hedge funds held shares or bullish call options in COF a year ago. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

More specifically, Arrowstreet Capital was the largest shareholder of Capital One Financial Corp. (NYSE:COF), with a stake worth $879.2 million reported as of the end of September. Trailing Arrowstreet Capital was Fisher Asset Management, which amassed a stake valued at $801 million. Pzena Investment Management, Eagle Capital Management, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Second Curve Capital allocated the biggest weight to Capital One Financial Corp. (NYSE:COF), around 5.67% of its 13F portfolio. No Street Capital is also relatively very bullish on the stock, earmarking 3.57 percent of its 13F equity portfolio to COF.

Seeing as Capital One Financial Corp. (NYSE:COF) has faced declining sentiment from the smart money, logic holds that there is a sect of hedge funds that slashed their entire stakes in the third quarter. Intriguingly, Steven Richman’s East Side Capital (RR Partners) said goodbye to the largest position of the 750 funds followed by Insider Monkey, comprising close to $99.6 million in stock, and Zach Schreiber’s Point State Capital was right behind this move, as the fund dropped about $43.5 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 9 funds in the third quarter.

Let’s check out hedge fund activity in other stocks similar to Capital One Financial Corp. (NYSE:COF). These stocks are Fiserv, Inc. (NASDAQ:FISV), Equinix Inc (NASDAQ:EQIX), Becton, Dickinson and Company (NYSE:BDX), Edwards Lifesciences Corporation (NYSE:EW), Vale SA (NYSE:VALE), DoorDash, Inc. (NYSE:DASH), and CME Group Inc (NASDAQ:CME). All of these stocks’ market caps match COF’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 46.1 hedge funds with bullish positions and the average amount invested in these stocks was $3382 million. That figure was $4709 million in COF’s case. Fiserv, Inc. (NASDAQ:FISV) is the most popular stock in this table. On the other hand Vale SA (NYSE:VALE) is the least popular one with only 27 bullish hedge fund positions. Capital One Financial Corp. (NYSE:COF) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for COF is 58.6. 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 positive signal but 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 beat the market again by 5.6 percentage points. Unfortunately COF wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on COF were disappointed as the stock returned -12.9% 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 many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.