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Are Hedge Funds Losing Faith in Foreign Banks Like Banco Bilbao Vizcaya Argentaria SA (BBVA)?

“Market volatility has picked up again over the past few weeks. Headlines highlight risks regarding interest rates, the Fed, China, house prices, auto sales, trade wars, and more. Uncertainty abounds. But doesn’t it always? I have no view on whether the recent volatility will continue for a while, or whether the market will be back at all-time highs before we know it. I remain focused on preserving and growing our capital, and continue to believe that the best way to do so is via a value-driven, concentrated, patient approach. I shun consensus holdings, rich valuations, and market fads, in favor of solid, yet frequently off-the-beaten-path, businesses run by excellent, aligned management teams, purchased at deep discounts to intrinsic value,” are the words of Maran Capital’s Dan Roller. His stock picks have been beating the S&P 500 Index handily. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards Banco Bilbao Vizcaya Argentaria SA (ADR) (NYSE:BBVA) and see how it was affected.

Hedge fund ownership of Banco Bilbao Vizcaya Argentaria SA (ADR) (NYSE:BBVA) fell by 44% in Q2, it being just one of several foreign bank stocks that hedge funds were closing out positions in. The Spanish bank’s nearly 8% dividend yield has not gone unnoticed by everyone however, as the company ranked 2nd among dividend stocks that Billionaire Ken Fisher is Bullish About.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 17.4% year to date and outperformed the market by more than 14 percentage points this year. This strategy also outperformed the market by 3 percentage points in the fourth quarter despite the market volatility (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

FISHER ASSET MANAGEMENT

How are hedge funds trading Banco Bilbao Vizcaya Argentaria SA (ADR) (NYSE:BBVA)?

At the end of the third quarter, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a 44% decline from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

BBVA_nov2018

More specifically, Ken Fisher’s Fisher Asset Management was the largest shareholder of Banco Bilbao Vizcaya Argentaria SA (ADR) (NYSE:BBVA), with a stake worth $304.8 million reported as of the end of June. Trailing Fisher Asset Management was Millennium Management, which amassed a stake valued at $6.6 million. Stevens Capital Management, Diamond Hill Capital, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.

Judging by the fact that Banco Bilbao Vizcaya Argentaria SA (ADR) (NYSE:BBVA) has faced declining sentiment from hedge fund managers, it’s easy to see that there exists a select few hedge funds that slashed their full holdings heading into Q3. It’s worth mentioning that Jim Simons’ Renaissance Technologies dropped the largest position of all the hedgies watched by Insider Monkey, worth about $4.3 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also dumped its stock, about $2.6 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 4 funds heading into Q3.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Banco Bilbao Vizcaya Argentaria SA (ADR) (NYSE:BBVA) but similarly valued. These stocks are Applied Materials, Inc. (NASDAQ:AMAT), ABB Ltd (ADR) (NYSE:ABB), Cognizant Technology Solutions Corp (NASDAQ:CTSH), and Praxair, Inc. (NYSE:PX). This group of stocks’ market caps are similar to BBVA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AMAT 45 2101247 -11
ABB 18 295156 6
CTSH 42 1992709 -9
PX 45 1906532 -7

As you can see these stocks had an average of 38 hedge funds with bullish positions and the average amount invested in these stocks was $1.57 billion. That figure was $314 million in BBVA’s case. Applied Materials, Inc. (NASDAQ:AMAT) is the most popular stock in this table. On the other hand ABB Ltd (ADR) (NYSE:ABB) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Banco Bilbao Vizcaya Argentaria SA (ADR) (NYSE:BBVA) is even less popular than ABB. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock.

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

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