Did Hedge Funds Make The Right Call On Banco Santander, S.A. (SAN) ?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Banco Santander, S.A. (NYSE:SAN) based on that data and determine whether they were really smart about the stock.

Is Banco Santander, S.A. (NYSE:SAN) undervalued? Hedge funds were taking a pessimistic view. The number of bullish hedge fund positions dropped by 3 lately. Our calculations also showed that SAN isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). SAN was in 18 hedge funds’ portfolios at the end of the first quarter of 2020. There were 21 hedge funds in our database with SAN holdings at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Ken Griffin

Ken Griffin of Citadel Investment Group

At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind we’re going to view the key hedge fund action regarding Banco Santander, S.A. (NYSE:SAN).

How are hedge funds trading Banco Santander, S.A. (NYSE:SAN)?

At Q1’s end, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from one quarter earlier. On the other hand, there were a total of 23 hedge funds with a bullish position in SAN 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.

Is SAN A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ken Fisher’s Fisher Asset Management has the largest position in Banco Santander, S.A. (NYSE:SAN), worth close to $268.5 million, amounting to 0.3% of its total 13F portfolio. Coming in second is  Renaissance Technologies, with a $27.6 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other members of the smart money that hold long positions contain John W. Rogers’s Ariel Investments, Cliff Asness’s AQR Capital Management and Mike Masters’s Masters Capital Management. In terms of the portfolio weights assigned to each position Masters Capital Management allocated the biggest weight to Banco Santander, S.A. (NYSE:SAN), around 1.09% of its 13F portfolio. Fisher Asset Management is also relatively very bullish on the stock, setting aside 0.33 percent of its 13F equity portfolio to SAN.

Due to the fact that Banco Santander, S.A. (NYSE:SAN) has experienced bearish sentiment from hedge fund managers, it’s safe to say that there exists a select few fund managers who were dropping their full holdings by the end of the first quarter. At the top of the heap, Richard Mashaal’s Rima Senvest Management dumped the biggest investment of the 750 funds watched by Insider Monkey, totaling close to $8.3 million in stock. Israel Englander’s fund, Millennium Management, also dropped its stock, about $6.5 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 3 funds by the end of the first quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Banco Santander, S.A. (NYSE:SAN) but similarly valued. We will take a look at Honda Motor Co Ltd (NYSE:HMC), America Movil SAB de CV (NYSE:AMX), Banco Santander (Brasil) SA (NYSE:BSBR), and General Dynamics Corporation (NYSE:GD). All of these stocks’ market caps are closest to SAN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HMC 8 144471 -1
AMX 11 128726 -6
BSBR 8 16250 0
GD 39 5111482 -7
Average 16.5 1350232 -3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $1350 million. That figure was $349 million in SAN’s case. General Dynamics Corporation (NYSE:GD) is the most popular stock in this table. On the other hand Honda Motor Co Ltd (NYSE:HMC) is the least popular one with only 8 bullish hedge fund positions. Banco Santander, S.A. (NYSE:SAN) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th but beat the market by 17.1 percentage points. Unfortunately SAN wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on SAN were disappointed as the stock returned 2.1% 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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