Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Banco Santander (Brasil) SA (NYSE:BSBR) to find out whether there were any major changes in hedge funds’ views.
Is BSBR stock a buy? Prominent investors were cutting their exposure. The number of bullish hedge fund positions dropped by 1 in recent months. Banco Santander (Brasil) SA (NYSE:BSBR) was in 5 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 15. Our calculations also showed that BSBR isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Ryan Tolkin, CIO of Schonfeld Strategic Advisors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $23 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we’re going to review the latest hedge fund action surrounding Banco Santander (Brasil) SA (NYSE:BSBR).
Do Hedge Funds Think BSBR Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from one quarter earlier. By comparison, 8 hedge funds held shares or bullish call options in BSBR a year ago. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Ronald Hua’s Qtron Investments has the largest position in Banco Santander (Brasil) SA (NYSE:BSBR), worth close to $1.3 million, amounting to 0.4% of its total 13F portfolio. The second most bullish fund manager is AQR Capital Management, managed by Cliff Asness, which holds a $1.2 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other professional money managers with similar optimism comprise Israel Englander’s Millennium Management, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Qtron Investments allocated the biggest weight to Banco Santander (Brasil) SA (NYSE:BSBR), around 0.36% of its 13F portfolio. Schonfeld Strategic Advisors is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to BSBR.
Seeing as Banco Santander (Brasil) SA (NYSE:BSBR) has faced falling interest from the aggregate hedge fund industry, logic holds that there is a sect of hedge funds who sold off their full holdings by the end of the first quarter. It’s worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital sold off the largest investment of the 750 funds watched by Insider Monkey, comprising close to $2.9 million in stock. Michael Gelband’s fund, ExodusPoint Capital, also said goodbye to its stock, about $0.2 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 1 funds by the end of the first quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Banco Santander (Brasil) SA (NYSE:BSBR) but similarly valued. We will take a look at Hormel Foods Corporation (NYSE:HRL), DTE Energy Company (NYSE:DTE), Carnival Corporation (NYSE:CCL), AvalonBay Communities Inc (NYSE:AVB), Copart, Inc. (NASDAQ:CPRT), Consolidated Edison, Inc. (NYSE:ED), and Datadog, Inc. (NASDAQ:DDOG). This group of stocks’ market values match BSBR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HRL | 26 | 483859 | -5 |
| DTE | 26 | 205605 | -3 |
| CCL | 44 | 593600 | -3 |
| AVB | 40 | 630728 | 8 |
| CPRT | 49 | 966765 | 3 |
| ED | 22 | 196630 | -10 |
| DDOG | 44 | 2383744 | -8 |
| Average | 35.9 | 780133 | -2.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.9 hedge funds with bullish positions and the average amount invested in these stocks was $780 million. That figure was $4 million in BSBR’s case. Copart, Inc. (NASDAQ:CPRT) is the most popular stock in this table. On the other hand Consolidated Edison, Inc. (NYSE:ED) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks Banco Santander (Brasil) SA (NYSE:BSBR) is even less popular than ED. Our overall hedge fund sentiment score for BSBR is 14. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Hedge funds clearly dropped the ball on BSBR as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th and still beat the market by 6.1 percentage points. A small number of hedge funds were also right about betting on BSBR as the stock returned 26.4% since Q1 (through June 18th) and outperformed the market by an even larger margin.
Follow Banco Santander Brasil S A (NYSE:BSBR)
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Disclosure: None. This article was originally published at Insider Monkey.
