It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren’t usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index’s returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you’d fail to beat the market. At the same time, the 15 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated a return of 19.7% during the first 2.5 months of 2019 (vs. 13.1% gain for SPY), with 93% of these stocks outperforming the benchmark. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Banco de Chile (NYSE:BCH).
Is Banco de Chile (NYSE:BCH) the right pick for your portfolio? Prominent investors are in an optimistic mood. The number of long hedge fund bets went up by 2 in recent months. Our calculations also showed that BCH isn’t among the 30 most popular stocks among hedge funds. BCH was in 4 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 2 hedge funds in our database with BCH positions at the end of the previous quarter.
In the 21st century investor’s toolkit there are a multitude of signals investors have at their disposal to size up stocks. A couple of the most innovative signals are hedge fund and insider trading moves. We have shown that, historically, those who follow the top picks of the best fund managers can outclass the S&P 500 by a solid margin (see the details here).
We’re going to take a peek at the recent hedge fund action regarding Banco de Chile (NYSE:BCH).
How are hedge funds trading Banco de Chile (NYSE:BCH)?
Heading into the first quarter of 2019, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 100% from the previous quarter. On the other hand, there were a total of 4 hedge funds with a bullish position in BCH a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Banco de Chile (NYSE:BCH), which was worth $59.6 million at the end of the fourth quarter. On the second spot was AQR Capital Management which amassed $13.1 million worth of shares. Moreover, Millennium Management and D E Shaw were also bullish on Banco de Chile (NYSE:BCH), allocating a large percentage of their portfolios to this stock.
Consequently, specific money managers have jumped into Banco de Chile (NYSE:BCH) headfirst. Millennium Management, managed by Israel Englander, created the most valuable position in Banco de Chile (NYSE:BCH). Millennium Management had $1.1 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also made a $0.6 million investment in the stock during the quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Banco de Chile (NYSE:BCH) but similarly valued. We will take a look at Caesars Entertainment Corp (NASDAQ:CZR), Webster Financial Corporation (NYSE:WBS), Chemed Corporation (NYSE:CHE), and Teradata Corporation (NYSE:TDC). All of these stocks’ market caps are closest to BCH’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CZR | 58 | 2224442 | -4 |
| WBS | 26 | 316331 | -2 |
| CHE | 24 | 389548 | 1 |
| TDC | 21 | 211609 | -2 |
| Average | 32.25 | 785483 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.25 hedge funds with bullish positions and the average amount invested in these stocks was $785 million. That figure was $74 million in BCH’s case. Caesars Entertainment Corp (NASDAQ:CZR) is the most popular stock in this table. On the other hand Teradata Corporation (NYSE:TDC) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Banco de Chile (NYSE:BCH) is even less popular than TDC. Hedge funds dodged a bullet by taking a bearish stance towards BCH. Our calculations showed that the top 15 most popular hedge fund stocks returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately BCH wasn’t nearly as popular as these 15 stock (hedge fund sentiment was very bearish); BCH investors were disappointed as the stock returned 8.9% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
