Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Capital One Financial Corp. (NYSE:COF) based on that data.
Hedge fund interest in Capital One Financial Corp. (NYSE:COF) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Canon Inc. (NYSE:CAJ), Equity Residential (NYSE:EQR), and Square, Inc. (NYSE:SQ) to gather more data points. Our calculations also showed that COF isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 44 percentage points since March 2017 (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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Richard S. Pzena of Pzena Investment Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this successful trader’s “corona catalyst plays“. Also, Europe is set to become the world’s largest cannabis market, so we checked out this European marijuana stock pitch. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s check out the new hedge fund action regarding Capital One Financial Corp. (NYSE:COF).
What does smart money think about Capital One Financial Corp. (NYSE:COF)?
Heading into the second quarter of 2020, a total of 50 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards COF over the last 18 quarters. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Pzena Investment Management, managed by Richard S. Pzena, holds the number one position in Capital One Financial Corp. (NYSE:COF). Pzena Investment Management has a $284.5 million position in the stock, comprising 2.2% of its 13F portfolio. Sitting at the No. 2 spot is Adage Capital Management, managed by Phill Gross and Robert Atchinson, which holds a $119.4 million position; 0.4% of its 13F portfolio is allocated to the company. Remaining professional money managers with similar optimism comprise Cliff Asness’s AQR Capital Management, Jacob Mitchell’s Antipodes Partners and Ken Fisher’s Fisher Asset Management. In terms of the portfolio weights assigned to each position Antipodes Partners allocated the biggest weight to Capital One Financial Corp. (NYSE:COF), around 4.18% of its 13F portfolio. Gillson Capital is also relatively very bullish on the stock, earmarking 3.33 percent of its 13F equity portfolio to COF.
Judging by the fact that Capital One Financial Corp. (NYSE:COF) has faced falling interest from the entirety of the hedge funds we track, we can see that there lies a certain “tier” of fund managers that slashed their positions entirely last quarter. It’s worth mentioning that James Parsons’s Junto Capital Management sold off the largest position of the 750 funds tracked by Insider Monkey, totaling close to $34.7 million in stock. Clint Carlson’s fund, Carlson Capital, also dumped its stock, about $10.9 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks similar to Capital One Financial Corp. (NYSE:COF). These stocks are Canon Inc. (NYSE:CAJ), Equity Residential (NYSE:EQR), Square, Inc. (NYSE:SQ), and T. Rowe Price Group, Inc. (NASDAQ:TROW). This group of stocks’ market values are closest to COF’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CAJ | 7 | 46934 | -1 |
| EQR | 24 | 175386 | -6 |
| SQ | 56 | 1609151 | 0 |
| TROW | 24 | 191083 | -3 |
| Average | 27.75 | 505639 | -2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.75 hedge funds with bullish positions and the average amount invested in these stocks was $506 million. That figure was $1107 million in COF’s case. Square, Inc. (NYSE:SQ) is the most popular stock in this table. On the other hand Canon Inc. (NYSE:CAJ) is the least popular one with only 7 bullish hedge fund positions. Capital One Financial Corp. (NYSE:COF) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd but still beat the market by 15.6 percentage points. Hedge funds were also right about betting on COF, though not to the same extent, as the stock returned 20.2% during the first two months of the second quarter (through May 22nd) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.
