Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by nearly 9 percentage points since the end of the third quarter of 2018 as investors worried over the possible ramifications of rising interest rates and escalation of the trade war with China. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only 298 S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Banco Santander (Brasil) SA (NYSE:BSBR) and see how the stock is affected by the recent hedge fund activity.
Hedge fund interest in Banco Santander (Brasil) SA (NYSE:BSBR) 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 BSBR to other stocks including Gilead Sciences, Inc. (NASDAQ:GILD), ASML Holding N.V. (NASDAQ:ASML), and Booking Holdings Inc. (NASDAQ:BKNG) to get a better sense of its popularity.
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.
Let’s view the latest hedge fund action surrounding Banco Santander (Brasil) SA (NYSE:BSBR).
Hedge fund activity in Banco Santander (Brasil) SA (NYSE:BSBR)
At the end of the first quarter, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in BSBR over the last 15 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
The largest stake in Banco Santander (Brasil) SA (NYSE:BSBR) was held by GLG Partners, which reported holding $62.2 million worth of stock at the end of March. It was followed by Capital Growth Management with a $58.1 million position. Other investors bullish on the company included Renaissance Technologies, Two Sigma Advisors, and AQR Capital Management.
Since Banco Santander (Brasil) SA (NYSE:BSBR) has faced falling interest from the entirety of the hedge funds we track, it’s easy to see that there were a few money managers who were dropping their positions entirely last quarter. Interestingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital said goodbye to the biggest investment of the 700 funds tracked by Insider Monkey, totaling close to $2.7 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund cut about $0.9 million worth. These moves are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Banco Santander (Brasil) SA (NYSE:BSBR) but similarly valued. These stocks are Gilead Sciences, Inc. (NASDAQ:GILD), ASML Holding N.V. (NASDAQ:ASML), Booking Holdings Inc. (NASDAQ:BKNG), and Charter Communications, Inc. (NASDAQ:CHTR). This group of stocks’ market valuations match BSBR’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GILD | 58 | 3780289 | 1 |
| ASML | 15 | 504431 | -1 |
| BKNG | 77 | 5667848 | -7 |
| CHTR | 67 | 7391525 | 3 |
| Average | 54.25 | 4336023 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 54.25 hedge funds with bullish positions and the average amount invested in these stocks was $4336 million. That figure was $161 million in BSBR’s case. Booking Holdings Inc. (NASDAQ:BKNG) is the most popular stock in this table. On the other hand ASML Holding N.V. (NASDAQ:ASML) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Banco Santander (Brasil) SA (NYSE:BSBR) is even less popular than ASML. 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 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 3.7% during the same time frame 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 13 of these stocks already outperformed the market so far in the second quarter.
Disclosure: None. This article was originally published at Insider Monkey.
