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Hedge Funds Are Selling Banco Santander, S.A. (SAN)

In this article you are going to find out whether hedge funds think Banco Santander, S.A. (NYSE:SAN) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Banco Santander, S.A. (NYSE:SAN) the right pick for your portfolio? Money managers are taking a bearish 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

John Rogers Ariel Investments

John Rogers of Ariel Investments

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a peek at the new hedge fund action surrounding Banco Santander, S.A. (NYSE:SAN).

What does smart money think about Banco Santander, S.A. (NYSE:SAN)?

At the end of the first quarter, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the fourth quarter of 2019. 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.

The largest stake in Banco Santander, S.A. (NYSE:SAN) was held by Fisher Asset Management, which reported holding $268.5 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $27.6 million position. Other investors bullish on the company included Ariel Investments, AQR Capital Management, and 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, dishing out 0.33 percent of its 13F equity portfolio to SAN.

Because Banco Santander, S.A. (NYSE:SAN) has faced bearish sentiment from the entirety of the hedge funds we track, we can see that there is a sect of money managers who sold off their positions entirely heading into Q4. At the top of the heap, Richard Mashaal’s Rima Senvest Management dropped the biggest position of the “upper crust” of funds watched by Insider Monkey, totaling an estimated $8.3 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund dropped about $6.5 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 3 funds heading into Q4.

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). This group of stocks’ market caps are similar 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 13.4% in 2020 through June 22nd but beat the market by 15.9 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 1.5% 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.