Were Hedge Funds Right About BBVA Banco Frances S.A. (BBAR)?

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. After several tireless days we have finished crunching the numbers from nearly 835 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of December 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards BBVA Banco Frances S.A. (NYSE:BBAR).

BBVA Banco Frances S.A. (NYSE:BBAR) was in 9 hedge funds’ portfolios at the end of December. BBAR has experienced a decrease in hedge fund interest of late. There were 10 hedge funds in our database with BBAR holdings at the end of the previous quarter. Our calculations also showed that BBAR 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).

Paul Marshall of Marshall Wace

We leave no stone unturned when looking for the next great investment idea. For example, COVID-19 pandemic is still the main driver of stock prices. So we are checking out this trader’s corona catalyst trades. 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. With all of this in mind let’s take a glance at the new hedge fund action surrounding BBVA Banco Frances S.A. (NYSE:BBAR).

How have hedgies been trading BBVA Banco Frances S.A. (NYSE:BBAR)?

At the end of the fourth quarter, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards BBAR over the last 18 quarters. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

More specifically, Marshall Wace LLP was the largest shareholder of BBVA Banco Frances S.A. (NYSE:BBAR), with a stake worth $2.8 million reported as of the end of September. Trailing Marshall Wace LLP was Arrowstreet Capital, which amassed a stake valued at $2.8 million. Millennium Management, D E Shaw, and Paloma Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Paloma Partners allocated the biggest weight to BBVA Banco Frances S.A. (NYSE:BBAR), around 0.02% of its 13F portfolio. Marshall Wace LLP is also relatively very bullish on the stock, designating 0.02 percent of its 13F equity portfolio to BBAR.

Due to the fact that BBVA Banco Frances S.A. (NYSE:BBAR) has experienced falling interest from the smart money, logic holds that there is a sect of hedge funds that elected to cut their positions entirely last quarter. Interestingly, Robert Charles Gibbins’s Autonomy Capital said goodbye to the largest stake of the 750 funds watched by Insider Monkey, valued at an estimated $0.3 million in stock. Minhua Zhang’s fund, Weld Capital Management, also said goodbye to its stock, about $0.3 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds last quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as BBVA Banco Frances S.A. (NYSE:BBAR) but similarly valued. These stocks are Signet Jewelers Limited (NYSE:SIG), Revlon Inc (NYSE:REV), Everi Holdings Inc (NYSE:EVRI), and Kenon Holdings Ltd. (NYSE:KEN). This group of stocks’ market caps resemble BBAR’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $195 million. That figure was $15 million in BBAR’s case. Revlon Inc (NYSE:REV) is the most popular stock in this table. On the other hand Kenon Holdings Ltd. (NYSE:KEN) is the least popular one with only 2 bullish hedge fund positions. BBVA Banco Frances S.A. (NYSE:BBAR) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately BBAR wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); BBAR investors were disappointed as the stock returned -56% 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market 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.