Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before the Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first quarter, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first quarter still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Banco Bradesco SA (NYSE:BBD) changed recently.
Is Banco Bradesco SA (NYSE:BBD) a splendid investment now? Money managers are becoming hopeful. The number of long hedge fund positions increased by 2 lately. Our calculations also showed that bbd isn’t among the 30 most popular stocks among hedge funds. BBD was in 18 hedge funds’ portfolios at the end of the first quarter of 2019. There were 16 hedge funds in our database with BBD holdings at the end of the previous quarter.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
We’re going to take a gander at the recent hedge fund action encompassing Banco Bradesco SA (NYSE:BBD).
What does the smart money think about Banco Bradesco SA (NYSE:BBD)?
Heading into the second quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in BBD over the last 15 quarters. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
More specifically, Fisher Asset Management was the largest shareholder of Banco Bradesco SA (NYSE:BBD), with a stake worth $344.2 million reported as of the end of March. Trailing Fisher Asset Management was Capital Growth Management, which amassed a stake valued at $154.2 million. Renaissance Technologies, D E Shaw, and GLG Partners were also very fond of the stock, giving the stock large weights in their portfolios.
Now, specific money managers were breaking ground themselves. Renaissance Technologies, managed by Jim Simons, created the largest position in Banco Bradesco SA (NYSE:BBD). Renaissance Technologies had $68.6 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also initiated a $1.9 million position during the quarter. The other funds with new positions in the stock are David Costen Haley’s HBK Investments, Mike Vranos’s Ellington, and Matthew Tewksbury’s Stevens Capital Management.
Let’s go over hedge fund activity in other stocks similar to Banco Bradesco SA (NYSE:BBD). We will take a look at Equinor ASA (NYSE:EQNR), Morgan Stanley (NYSE:MS), Mondelez International Inc (NASDAQ:MDLZ), and The Goldman Sachs Group, Inc. (NYSE:GS). All of these stocks’ market caps are closest to BBD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EQNR | 10 | 352240 | -3 |
| MS | 54 | 4060103 | -3 |
| MDLZ | 47 | 2160286 | 2 |
| GS | 76 | 7453407 | 6 |
| Average | 46.75 | 3506509 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 46.75 hedge funds with bullish positions and the average amount invested in these stocks was $3507 million. That figure was $753 million in BBD’s case. The Goldman Sachs Group, Inc. (NYSE:GS) is the most popular stock in this table. On the other hand Equinor ASA (NYSE:EQNR) is the least popular one with only 10 bullish hedge fund positions. Banco Bradesco SA (NYSE:BBD) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. A small number of hedge funds were also right about betting on BBD, though not to the same extent, as the stock returned 1.6% during the same time frame and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
