Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of The Charles Schwab Corporation (NYSE:SCHW) based on that data.
The Charles Schwab Corporation (NYSE:SCHW) has seen a decrease in activity from the world’s largest hedge funds recently. Our calculations also showed that SCHW isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 44 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
David Blood of Generation Investment Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Europe is set to become the world’s largest cannabis market, so we checked out this European marijuana stock pitch. Also, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this analyst’s “corona catalyst plays“. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a gander at the key hedge fund action regarding The Charles Schwab Corporation (NYSE:SCHW).
How are hedge funds trading The Charles Schwab Corporation (NYSE:SCHW)?
At Q1’s end, a total of 62 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SCHW over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in The Charles Schwab Corporation (NYSE:SCHW) was held by Generation Investment Management, which reported holding $1089.1 million worth of stock at the end of September. It was followed by Route One Investment Company with a $489.8 million position. Other investors bullish on the company included Diamond Hill Capital, Citadel Investment Group, and Eminence Capital. In terms of the portfolio weights assigned to each position Yost Capital Management allocated the biggest weight to The Charles Schwab Corporation (NYSE:SCHW), around 16.82% of its 13F portfolio. Route One Investment Company is also relatively very bullish on the stock, earmarking 16.05 percent of its 13F equity portfolio to SCHW.
Seeing as The Charles Schwab Corporation (NYSE:SCHW) has experienced falling interest from the entirety of the hedge funds we track, it’s easy to see that there exists a select few fund managers that decided to sell off their entire stakes by the end of the third quarter. It’s worth mentioning that Phill Gross and Robert Atchinson’s Adage Capital Management dropped the largest investment of the 750 funds watched by Insider Monkey, comprising about $68.8 million in stock, and Dan Loeb’s Third Point was right behind this move, as the fund dumped about $47.6 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 8 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as The Charles Schwab Corporation (NYSE:SCHW) but similarly valued. We will take a look at The Progressive Corporation (NYSE:PGR), Vale SA (NYSE:VALE), The Sherwin-Williams Company (NYSE:SHW), and Applied Materials, Inc. (NASDAQ:AMAT). All of these stocks’ market caps match SCHW’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PGR | 51 | 1505680 | 3 |
| VALE | 28 | 1111939 | 2 |
| SHW | 57 | 1511243 | 2 |
| AMAT | 56 | 2317608 | -16 |
| Average | 48 | 1611618 | -2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 48 hedge funds with bullish positions and the average amount invested in these stocks was $1612 million. That figure was $2907 million in SCHW’s case. The Sherwin-Williams Company (NYSE:SHW) is the most popular stock in this table. On the other hand Vale SA (NYSE:VALE) is the least popular one with only 28 bullish hedge fund positions. Compared to these stocks The Charles Schwab Corporation (NYSE:SCHW) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd and still beat the market by 15.6 percentage points. Unfortunately SCHW wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on SCHW were disappointed as the stock returned -1.8% during the second quarter (through May 22nd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.
