At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Banco Santander (Brasil) SA (NYSE:BSBR).
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 General Dynamics Corporation (NYSE:GD), Aon plc (NYSE:AON), and Dollar General Corp. (NYSE:DG) to get a better sense of its popularity.
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 58 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.
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At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to take a gander at the recent hedge fund action regarding Banco Santander (Brasil) SA (NYSE:BSBR).
How are hedge funds trading Banco Santander (Brasil) SA (NYSE:BSBR)?
Heading into the second quarter of 2020, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards BSBR over the last 18 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Is BSBR A Good Stock To Buy?
More specifically, Renaissance Technologies was the largest shareholder of Banco Santander (Brasil) SA (NYSE:BSBR), with a stake worth $10.7 million reported as of the end of September. Trailing Renaissance Technologies was Millennium Management, which amassed a stake valued at $3.8 million. Engineers Gate Manager, AQR Capital Management, and Schonfeld Strategic Advisors 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 Engineers Gate Manager allocated the biggest weight to Banco Santander (Brasil) SA (NYSE:BSBR), around 0.04% of its 13F portfolio. Schonfeld Strategic Advisors is also relatively very bullish on the stock, setting aside 0.03 percent of its 13F equity portfolio to BSBR.
Judging by the fact that Banco Santander (Brasil) SA (NYSE:BSBR) has witnessed bearish sentiment from the entirety of the hedge funds we track, we can see that there were a few money managers who sold off their full holdings in the first quarter. Interestingly, Ken Heebner's Capital Growth Management said goodbye to the largest stake of all the hedgies watched by Insider Monkey, comprising close to $37.4 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital was right behind this move, as the fund cut about $8.8 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's check out hedge fund activity in other stocks similar to Banco Santander (Brasil) SA (NYSE:BSBR). We will take a look at General Dynamics Corporation (NYSE:GD), Aon plc (NYSE:AON), Dollar General Corp. (NYSE:DG), and Ferrari N.V. (NYSE:RACE). This group of stocks' market values are similar to BSBR's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GD,39,5111482,-7 AON,47,2705439,-4 DG,60,2102704,10 RACE,29,1729509,-7 Average,43.75,2912284,-2 [/table]
As you can see these stocks had an average of 43.75 hedge funds with bullish positions and the average amount invested in these stocks was $2912 million. That figure was $16 million in BSBR's case. Dollar General Corp. (NYSE:DG) is the most popular stock in this table. On the other hand Ferrari N.V. (NYSE:RACE) is the least popular one with only 29 bullish hedge fund positions. Compared to these stocks Banco Santander (Brasil) SA (NYSE:BSBR) is even less popular than RACE. Hedge funds dodged a bullet by taking a bearish stance towards BSBR. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.2% in 2020 through June 17th but managed to beat the market by 14.8 percentage points. Unfortunately BSBR wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); BSBR investors were disappointed as the stock returned 15% during the second quarter (through June 17th) 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 so far in 2020.
