Capital One Financial Corp. (NYSE:COF): Hedge Funds and Insiders Are Bearish, What Should You Do?

Capital One Financial Corp. (NYSE:COF) was in 58 hedge funds’ portfolio at the end of the fourth quarter of 2012. COF shareholders have witnessed a decrease in hedge fund interest lately. There were 63 hedge funds in our database with COF holdings at the end of the previous quarter.

If you’d ask most market participants, hedge funds are seen as slow, outdated investment tools of the past. While there are over 8000 funds trading today, we hone in on the crème de la crème of this group, around 450 funds. It is estimated that this group has its hands on the lion’s share of the hedge fund industry’s total asset base, and by monitoring their top equity investments, we have discovered a number of investment strategies that have historically beaten the market. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 25 percentage points in 6.5 month (see the details here).

Capital One Financial Corp. (NYSE:COF)Just as key, optimistic insider trading sentiment is a second way to break down the stock market universe. As the old adage goes: there are many stimuli for an upper level exec to downsize shares of his or her company, but only one, very obvious reason why they would initiate a purchase. Plenty of academic studies have demonstrated the market-beating potential of this method if “monkeys” know what to do (learn more here).

Consequently, we’re going to take a glance at the latest action encompassing Capital One Financial Corp. (NYSE:COF).

How are hedge funds trading Capital One Financial Corp. (NYSE:COF)?

In preparation for this year, a total of 58 of the hedge funds we track were bullish in this stock, a change of -8% from the previous quarter. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were upping their holdings substantially.

Of the funds we track, Viking Global, managed by Andreas Halvorsen, holds the largest position in Capital One Financial Corp. (NYSE:COF). Viking Global has a $792 million position in the stock, comprising 5.5% of its 13F portfolio. On Viking Global’s heels is Stephen Mandel of Lone Pine Capital, with a $257 million position; 1.6% of its 13F portfolio is allocated to the company. Some other hedgies that are bullish include Donald Chiboucis’s Columbus Circle Investors, Rob Citrone’s Discovery Capital Management and Ken Griffin’s Citadel Investment Group.

Due to the fact that Capital One Financial Corp. (NYSE:COF) has witnessed declining sentiment from the aggregate hedge fund industry, it’s safe to say that there was a specific group of funds that decided to sell off their full holdings in Q4. Interestingly, Richard Schimel’s Diamondback Capital dropped the largest position of all the hedgies we key on, totaling about $109 million in stock.. Kenneth Mario Garschina’s fund, Mason Capital Management, also dumped its stock, about $82 million worth. These moves are important to note, as total hedge fund interest fell by 5 funds in Q4.

Insider trading activity in Capital One Financial Corp. (NYSE:COF)

Insider purchases made by high-level executives is at its handiest when the company in question has experienced transactions within the past half-year. Over the latest half-year time frame, Capital One Financial Corp. (NYSE:COF) has seen zero unique insiders buying, and 6 insider sales (see the details of insider trades here).

With the results demonstrated by our studies, retail investors must always watch hedge fund and insider trading sentiment, and Capital One Financial Corp. (NYSE:COF) is no exception.

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