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. Insider Monkey finished processing 835 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2019. In this article we are going to take a look at smart money sentiment towards Banco Santander, S.A. (NYSE:SAN).
Hedge fund interest in Banco Santander, S.A. (NYSE:SAN) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare SAN to other stocks including The Bank of Nova Scotia (NYSE:BNS), Dominion Resources, Inc. (NYSE:D), and Intuitive Surgical, Inc. (NASDAQ:ISRG) to get a better sense of its popularity.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
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. Now let’s take a peek at the fresh hedge fund action encompassing Banco Santander, S.A. (NYSE:SAN).
How have hedgies been trading Banco Santander, S.A. (NYSE:SAN)?
At the end of the fourth quarter, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the third quarter of 2019. By comparison, 18 hedge funds held shares or bullish call options in SAN a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
Among these funds, Fisher Asset Management held the most valuable stake in Banco Santander, S.A. (NYSE:SAN), which was worth $463.1 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $42.5 million worth of shares. Arrowstreet Capital, Masters Capital Management, and AQR Capital Management 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 Masters Capital Management allocated the biggest weight to Banco Santander, S.A. (NYSE:SAN), around 1.12% of its 13F portfolio. Rima Senvest Management is also relatively very bullish on the stock, setting aside 0.56 percent of its 13F equity portfolio to SAN.
Due to the fact that Banco Santander, S.A. (NYSE:SAN) has faced bearish sentiment from the smart money, it’s safe to say that there lies a certain “tier” of hedgies that decided to sell off their positions entirely last quarter. It’s worth mentioning that Renaissance Technologies dumped the biggest investment of the “upper crust” of funds tracked by Insider Monkey, totaling close to $3.6 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund cut about $0.8 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks similar to Banco Santander, S.A. (NYSE:SAN). We will take a look at The Bank of Nova Scotia (NYSE:BNS), Dominion Resources, Inc. (NYSE:D), Intuitive Surgical, Inc. (NASDAQ:ISRG), and Intuit Inc. (NASDAQ:INTU). This group of stocks’ market values are closest to SAN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BNS | 16 | 413736 | 0 |
| D | 37 | 773242 | -8 |
| ISRG | 51 | 1118443 | 6 |
| INTU | 54 | 1701224 | -1 |
| Average | 39.5 | 1001661 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 39.5 hedge funds with bullish positions and the average amount invested in these stocks was $1002 million. That figure was $637 million in SAN’s case. Intuit Inc. (NASDAQ:INTU) is the most popular stock in this table. On the other hand The Bank of Nova Scotia (NYSE:BNS) is the least popular one with only 16 bullish hedge fund positions. Banco Santander, S.A. (NYSE:SAN) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds 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 beat the market by 3.1 percentage points. Unfortunately SAN wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SAN investors were disappointed as the stock returned -28.3% 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 in Q1.
Disclosure: None. This article was originally published at Insider Monkey.
