Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 835 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article we look at what those investors think of Banco Bradesco SA (NYSE:BBD).
Banco Bradesco SA (NYSE:BBD) was in 18 hedge funds’ portfolios at the end of the fourth quarter of 2019. BBD shareholders have witnessed an increase in support from the world’s most elite money managers lately. There were 17 hedge funds in our database with BBD positions at the end of the previous quarter. Our calculations also showed that BBD isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to 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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 41 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Ken Fisher of Fisher Asset Management
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 check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. Keeping this in mind we’re going to view the new hedge fund action surrounding Banco Bradesco SA (NYSE:BBD).
How have hedgies been trading Banco Bradesco SA (NYSE:BBD)?
Heading into the first quarter of 2020, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from one quarter earlier. On the other hand, there were a total of 16 hedge funds with a bullish position in BBD a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Ken Fisher’s Fisher Asset Management has the number one position in Banco Bradesco SA (NYSE:BBD), worth close to $408.3 million, comprising 0.4% of its total 13F portfolio. The second largest stake is held by GQG Partners, managed by Rajiv Jain, which holds a $86.4 million position; 0.6% of its 13F portfolio is allocated to the stock. Remaining professional money managers that are bullish consist of Howard Marks’s Oaktree Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Ken Heebner’s Capital Growth Management. In terms of the portfolio weights assigned to each position Sloane Robinson Investment Management allocated the biggest weight to Banco Bradesco SA (NYSE:BBD), around 3.66% of its 13F portfolio. Capital Growth Management is also relatively very bullish on the stock, earmarking 3.22 percent of its 13F equity portfolio to BBD.
As aggregate interest increased, specific money managers were breaking ground themselves. GQG Partners, managed by Rajiv Jain, assembled the most valuable position in Banco Bradesco SA (NYSE:BBD). GQG Partners had $86.4 million invested in the company at the end of the quarter. Howard Marks’s Oaktree Capital Management also initiated a $51.6 million position during the quarter. The following funds were also among the new BBD investors: Hugh Sloane’s Sloane Robinson Investment Management and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s also examine hedge fund activity in other stocks similar to Banco Bradesco SA (NYSE:BBD). These stocks are ConocoPhillips (NYSE:COP), Chubb Limited (NYSE:CB), PNC Financial Services Group Inc. (NYSE:PNC), and Banco Santander, S.A. (NYSE:SAN). All of these stocks’ market caps match BBD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| COP | 62 | 2437765 | -8 |
| CB | 24 | 588256 | -3 |
| PNC | 42 | 2157090 | 0 |
| SAN | 21 | 637200 | 0 |
| Average | 37.25 | 1455078 | -2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 37.25 hedge funds with bullish positions and the average amount invested in these stocks was $1455 million. That figure was $662 million in BBD’s case. ConocoPhillips (NYSE:COP) is the most popular stock in this table. On the other hand Banco Santander, S.A. (NYSE:SAN) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Banco Bradesco SA (NYSE:BBD) is even less popular than SAN. Hedge funds dodged a bullet by taking a bearish stance towards BBD. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but managed to beat the market by 3.1 percentage points. Unfortunately BBD wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); BBD investors were disappointed as the stock returned -41% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in Q1.
Disclosure: None. This article was originally published at Insider Monkey.
