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 (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. At Insider Monkey, we pore over the filings of nearly 835 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of December 31. In this article, we will use that wealth of knowledge to determine whether or not Banco Macro SA (NYSE:BMA) makes for a good investment right now.
Banco Macro SA (NYSE:BMA) has experienced a decrease in hedge fund sentiment of late. Our calculations also showed that BMA isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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.
Bruce Kovner of Caxton Associates LP
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a peek at the fresh hedge fund action regarding Banco Macro SA (NYSE:BMA).
What have hedge funds been doing with Banco Macro SA (NYSE:BMA)?
At the end of the fourth quarter, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of -42% from one quarter earlier. By comparison, 17 hedge funds held shares or bullish call options in BMA a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
The largest stake in Banco Macro SA (NYSE:BMA) was held by Odey Asset Management Group, which reported holding $97.9 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $6.5 million position. Other investors bullish on the company included Citadel Investment Group, Renaissance Technologies, and D E Shaw. In terms of the portfolio weights assigned to each position Odey Asset Management Group allocated the biggest weight to Banco Macro SA (NYSE:BMA), around 10.23% of its 13F portfolio. Ionic Capital Management is also relatively very bullish on the stock, designating 0.7 percent of its 13F equity portfolio to BMA.
Due to the fact that Banco Macro SA (NYSE:BMA) has witnessed falling interest from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of funds that decided to sell off their full holdings by the end of the third quarter. Interestingly, Noam Gottesman’s GLG Partners sold off the biggest stake of the 750 funds followed by Insider Monkey, valued at about $3.8 million in stock. Bruce J. Richards and Louis Hanover’s fund, Marathon Asset Management, also dumped its stock, about $2.9 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 5 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Banco Macro SA (NYSE:BMA). These stocks are Colony Capital Inc (NYSE:CLNY), Rogers Corporation (NYSE:ROG), Taylor Morrison Home Corp (NYSE:TMHC), and Nelnet, Inc. (NYSE:NNI). All of these stocks’ market caps match BMA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CLNY | 25 | 353690 | 3 |
| ROG | 21 | 63127 | 0 |
| TMHC | 28 | 458004 | 1 |
| NNI | 14 | 100877 | 2 |
| Average | 22 | 243925 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $244 million. That figure was $116 million in BMA’s case. Taylor Morrison Home Corp (NYSE:TMHC) is the most popular stock in this table. On the other hand Nelnet, Inc. (NYSE:NNI) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Banco Macro SA (NYSE:BMA) is even less popular than NNI. Hedge funds dodged a bullet by taking a bearish stance towards BMA. 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 13.0% in 2020 through April 6th but managed to beat the market by 4.2 percentage points. Unfortunately BMA wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); BMA investors were disappointed as the stock returned -53.8% 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 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
