Where Do Hedge Funds Stand On Banco de Chile (BCH)?

In this article you are going to find out whether hedge funds think Banco de Chile (NYSE:BCH) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Banco de Chile (NYSE:BCH) investors should pay attention to an increase in hedge fund sentiment in recent months. Banco de Chile (NYSE:BCH) was in 4 hedge funds’ portfolios at the end of September. The all time high for this statistics is 10. Our calculations also showed that BCH isn’t among the 30 most popular stocks among hedge funds (click for Q3 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 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 S&P 500 ETFs by 66 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 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.

Ian Wace of Marshall Wace

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now we’re going to analyze the fresh hedge fund action surrounding Banco de Chile (NYSE:BCH).

How have hedgies been trading Banco de Chile (NYSE:BCH)?

Heading into the fourth quarter of 2020, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 33% from the previous quarter. By comparison, 4 hedge funds held shares or bullish call options in BCH a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Renaissance Technologies has the biggest position in Banco de Chile (NYSE:BCH), worth close to $30.2 million, comprising less than 0.1%% of its total 13F portfolio. Coming in second is DPM Capital, led by Pedro Escudero, holding a $2.3 million position; 1.4% of its 13F portfolio is allocated to the company. Remaining peers that are bullish contain Cliff Asness’s AQR Capital Management, Paul Marshall and Ian Wace’s Marshall Wace LLP and . In terms of the portfolio weights assigned to each position DPM Capital allocated the biggest weight to Banco de Chile (NYSE:BCH), around 1.36% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, dishing out 0.03 percent of its 13F equity portfolio to BCH.

With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. DPM Capital, managed by Pedro Escudero, assembled the biggest position in Banco de Chile (NYSE:BCH). DPM Capital had $2.3 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $0.2 million investment in the stock during the quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Banco de Chile (NYSE:BCH). We will take a look at Amdocs Limited (NYSE:DOX), Host Hotels and Resorts Inc (NYSE:HST), Pentair plc (NYSE:PNR), New Fortress Energy LLC (NASDAQ:NFE), Exelixis, Inc. (NASDAQ:EXEL), Alteryx, Inc. (NYSE:AYX), and F5 Networks, Inc. (NASDAQ:FFIV). All of these stocks’ market caps resemble BCH’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.9 hedge funds with bullish positions and the average amount invested in these stocks was $626 million. That figure was $35 million in BCH’s case. Alteryx, Inc. (NYSE:AYX) is the most popular stock in this table. On the other hand New Fortress Energy LLC (NASDAQ:NFE) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Banco de Chile (NYSE:BCH) is even less popular than NFE. Our overall hedge fund sentiment score for BCH is 18. 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 BCH as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on BCH as the stock returned 16.3% since Q3 (through November 27th) and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.