We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (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. Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 835 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Popular Inc (NASDAQ:BPOP), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Popular Inc (NASDAQ:BPOP) has experienced an increase in hedge fund interest lately. BPOP was in 33 hedge funds' portfolios at the end of December. There were 31 hedge funds in our database with BPOP holdings at the end of the previous quarter. Our calculations also showed that BPOP 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).
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 41 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.
[caption id="attachment_30600" align="aligncenter" width="399"] Bruce Kovner of Caxton Associates LP[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. 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 view the key hedge fund action regarding Popular Inc (NASDAQ:BPOP).
What have hedge funds been doing with Popular Inc (NASDAQ:BPOP)?
Heading into the first quarter of 2020, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from one quarter earlier. On the other hand, there were a total of 32 hedge funds with a bullish position in BPOP a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Popular Inc (NASDAQ:BPOP) was held by Polaris Capital Management, which reported holding $238 million worth of stock at the end of September. It was followed by AQR Capital Management with a $212.8 million position. Other investors bullish on the company included Alyeska Investment Group, Millennium Management, and GLG Partners. In terms of the portfolio weights assigned to each position Polaris Capital Management allocated the biggest weight to Popular Inc (NASDAQ:BPOP), around 9.81% of its 13F portfolio. Shoals Capital Management is also relatively very bullish on the stock, setting aside 9.77 percent of its 13F equity portfolio to BPOP.
As one would reasonably expect, specific money managers were breaking ground themselves. Gillson Capital, managed by Daniel Johnson, initiated the most valuable position in Popular Inc (NASDAQ:BPOP). Gillson Capital had $8.8 million invested in the company at the end of the quarter. Gregg Moskowitz's Interval Partners also initiated a $3.3 million position during the quarter. The other funds with new positions in the stock are Ray Dalio's Bridgewater Associates, Mike Vranos's Ellington, and Bruce Kovner's Caxton Associates LP.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Popular Inc (NASDAQ:BPOP) but similarly valued. We will take a look at Avalara, Inc. (NYSE:AVLR), 51job, Inc. (NASDAQ:JOBS), Grupo Aeroportuario del Sureste, S. A. B. de C. V. (NYSE:ASR), and Cemex SAB de CV (NYSE:CX). This group of stocks' market valuations resemble BPOP's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AVLR,47,1055451,-1 JOBS,8,19080,0 ASR,10,61093,6 CX,13,89214,2 Average,19.5,306210,1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $306 million. That figure was $818 million in BPOP's case. Avalara, Inc. (NYSE:AVLR) is the most popular stock in this table. On the other hand 51job, Inc. (NASDAQ:JOBS) is the least popular one with only 8 bullish hedge fund positions. Popular Inc (NASDAQ:BPOP) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately BPOP wasn't nearly as popular as these 20 stocks and hedge funds that were betting on BPOP were disappointed as the stock returned -43.1% 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year. 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.
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