Did Hedge Funds Drop The Ball On Banco Macro SA (BMA) ?

It was a rough fourth quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 18.7% so far in 2019 and outperformed the S&P 500 ETF by 6.6 percentage points. We are done processing the latest 13f filings and in this article we will study how hedge fund sentiment towards Banco Macro SA (NYSE:BMA) changed during the first quarter.

Banco Macro SA (NYSE:BMA) was in 16 hedge funds’ portfolios at the end of the first quarter of 2019. BMA investors should be aware of a decrease in hedge fund interest recently. There were 17 hedge funds in our database with BMA positions at the end of the previous quarter. Our calculations also showed that bma isn’t among the 30 most popular stocks among hedge funds.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 40 percentage points since May 2014 through May 30, 2019 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

Crispin Odey

Let’s analyze the latest hedge fund action regarding Banco Macro SA (NYSE:BMA).

How are hedge funds trading Banco Macro SA (NYSE:BMA)?

Heading into the second quarter of 2019, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the fourth quarter of 2018. By comparison, 17 hedge funds held shares or bullish call options in BMA 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.

No of Hedge Funds with BMA Positions

More specifically, Odey Asset Management Group was the largest shareholder of Banco Macro SA (NYSE:BMA), with a stake worth $93.6 million reported as of the end of March. Trailing Odey Asset Management Group was EMS Capital, which amassed a stake valued at $29.2 million. Millennium Management, Horseman Capital Management, and LMR Partners were also very fond of the stock, giving the stock large weights in their portfolios.

Due to the fact that Banco Macro SA (NYSE:BMA) has faced bearish sentiment from the smart money, it’s easy to see that there was a specific group of fund managers who sold off their full holdings last quarter. It’s worth mentioning that Rob Citrone’s Discovery Capital Management said goodbye to the largest stake of all the hedgies followed by Insider Monkey, valued at an estimated $18.2 million in stock, and Parvinder Thiara’s Athanor Capital was right behind this move, as the fund said goodbye to about $1.5 million worth. These moves are important to note, as total hedge fund interest dropped by 1 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to Banco Macro SA (NYSE:BMA). We will take a look at Kennedy-Wilson Holdings Inc (NYSE:KW), Core Laboratories N.V. (NYSE:CLB), RLJ Lodging Trust (NYSE:RLJ), and Amicus Therapeutics, Inc. (NASDAQ:FOLD). This group of stocks’ market valuations resemble BMA’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KW 14 503807 1
CLB 15 278565 0
RLJ 21 192850 -4
FOLD 30 1046575 4
Average 20 505449 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $505 million. That figure was $179 million in BMA’s case. Amicus Therapeutics, Inc. (NASDAQ:FOLD) is the most popular stock in this table. On the other hand Kennedy-Wilson Holdings Inc (NYSE:KW) is the least popular one with only 14 bullish hedge fund positions. Banco Macro SA (NYSE:BMA) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on BMA as the stock returned 49.7% during the same time frame and outperformed the market by an even larger margin.

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