Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant out-performance. That’s why we pay special attention to hedge fund activity in these stocks.
Banco Santander, S.A. (ADR) (NYSE:SAN) was in 16 hedge funds’ portfolios at the end of September. SAN investors should be aware of a decrease in activity from the world’s largest hedge funds recently. There were 23 hedge funds in our database with SAN 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 Goldman Sachs Group, Inc. (NYSE:GS), American Express Company (NYSE:AXP), and Diageo plc (ADR) (NYSE:DEO) to gather more data points.
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According to most stock holders, hedge funds are viewed as slow, outdated financial vehicles of yesteryear. While there are greater than 8000 funds in operation today, Our researchers hone in on the top tier of this club, about 700 funds. These investment experts command the lion’s share of all hedge funds’ total asset base, and by following their best equity investments, Insider Monkey has determined a number of investment strategies that have historically outrun the broader indices. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points per year for a decade in their back tests.
Keeping this in mind, let’s take a look at the recent action encompassing Banco Santander, S.A. (ADR) (NYSE:SAN).
Hedge fund activity in Banco Santander, S.A. (ADR) (NYSE:SAN)
At the end of the third quarter, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -30% from the second quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Cliff Asness’ AQR Capital Management has the most valuable position in Banco Santander, S.A. (ADR) (NYSE:SAN), worth close to $42.6 million, accounting for 0.1% of its total 13F portfolio. On AQR Capital Management’s heels is Driehaus Capital, managed by Richard Driehaus, which holds a $24.8 million position; 0.9% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors that hold long positions comprise Howard Marks’ Oaktree Capital Management, John Thiessen’s Vertex One Asset Management and Matthew Hulsizer’s PEAK6 Capital Management.
Due to the fact that Banco Santander, S.A. (ADR) (NYSE:SAN) has experienced a declining sentiment from the smart money, it’s easy to see that there exists a select few money managers who sold off their entire stakes by the end of the third quarter. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital cut the biggest position of the 700 funds monitored by Insider Monkey, worth an estimated $2.2 million in stock. Deepak Gulati’s fund, Argentiere Capital, also said goodbye to its stock, about $1 million worth. These transactions are important to note, as total hedge fund interest dropped by 7 funds by the end of the third quarter.
Let’s now review hedge fund activity in other stocks similar to Banco Santander, S.A. (ADR) (NYSE:SAN). We will take a look at Goldman Sachs Group, Inc. (NYSE:GS), American Express Company (NYSE:AXP), Diageo plc (ADR) (NYSE:DEO), and Honeywell International Inc. (NYSE:HON). This group of stocks’ market caps are similar to SAN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GS | 63 | 5571714 | -4 |
| AXP | 52 | 16119933 | -5 |
| DEO | 25 | 1148398 | -1 |
| HON | 46 | 1294250 | -3 |
As you can see these stocks had an average of 47 hedge funds with bullish positions and the average amount invested in these stocks was $6.03 billion. That figure was just $145 million in SAN’s case. Goldman Sachs Group, Inc. (NYSE:GS) is the most popular stock in this table. On the other hand Diageo plc (ADR) (NYSE:DEO) is the least popular one with only 25 bullish hedge fund positions. Compared to these stocks Banco Santander, S.A. (ADR) (NYSE:SAN) is even less popular than DEO. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is required.
