Looking for stocks with high upside potential? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 26% in 2019 (through November 22nd). Conversely, hedge funds’ 20 preferred S&P 500 stocks generated a return of nearly 35% during the same period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ consensus stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Banco Santander (Brasil) SA (NYSE:BSBR).
Is Banco Santander (Brasil) SA (NYSE:BSBR) a first-rate investment right now? Hedge funds are becoming hopeful. The number of bullish hedge fund bets inched up by 3 in recent months. Our calculations also showed that BSBR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). BSBR was in 14 hedge funds’ portfolios at the end of the third quarter of 2019. There were 11 hedge funds in our database with BSBR positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a peek at the new hedge fund action regarding Banco Santander (Brasil) SA (NYSE:BSBR).
How are hedge funds trading Banco Santander (Brasil) SA (NYSE:BSBR)?
At the end of the third quarter, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 27% from the second quarter of 2019. On the other hand, there were a total of 7 hedge funds with a bullish position in BSBR 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 Heebner’s Capital Growth Management has the most valuable position in Banco Santander (Brasil) SA (NYSE:BSBR), worth close to $45 million, comprising 3.4% of its total 13F portfolio. Sitting at the No. 2 spot is Noam Gottesman of GLG Partners, with a $38.1 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other professional money managers that are bullish consist of Renaissance Technologies, John Overdeck and David Siegel’s Two Sigma Advisors and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position Capital Growth Management allocated the biggest weight to Banco Santander (Brasil) SA (NYSE:BSBR), around 3.45% of its 13F portfolio. Islet Management is also relatively very bullish on the stock, setting aside 0.31 percent of its 13F equity portfolio to BSBR.
Now, some big names have been driving this bullishness. Islet Management, managed by Joseph Samuels, created the most valuable position in Banco Santander (Brasil) SA (NYSE:BSBR). Islet Management had $2.5 million invested in the company at the end of the quarter. David E. Shaw’s D E Shaw also made a $0.3 million investment in the stock during the quarter. The following funds were also among the new BSBR investors: Steve Cohen’s Point72 Asset Management and Dmitry Balyasny’s Balyasny Asset Management.
Let’s now take a look at hedge fund activity in other stocks similar to Banco Santander (Brasil) SA (NYSE:BSBR). These stocks are Stryker Corporation (NYSE:SYK), Gilead Sciences, Inc. (NASDAQ:GILD), Mondelez International Inc (NASDAQ:MDLZ), and General Electric Company (NYSE:GE). All of these stocks’ market caps are closest to BSBR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SYK | 33 | 527278 | 3 |
| GILD | 58 | 3262691 | 1 |
| MDLZ | 52 | 2813252 | 5 |
| GE | 51 | 4455114 | -5 |
| Average | 48.5 | 2764584 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 48.5 hedge funds with bullish positions and the average amount invested in these stocks was $2765 million. That figure was $125 million in BSBR’s case. Gilead Sciences, Inc. (NASDAQ:GILD) is the most popular stock in this table. On the other hand Stryker Corporation (NYSE:SYK) is the least popular one with only 33 bullish hedge fund positions. Compared to these stocks Banco Santander (Brasil) SA (NYSE:BSBR) is even less popular than SYK. Hedge funds dodged a bullet by taking a bearish stance towards BSBR. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately BSBR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); BSBR investors were disappointed as the stock returned -4% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
