While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Capital One Financial Corp. (NYSE:COF).
Capital One Financial Corp. (NYSE:COF) has experienced an increase in hedge fund interest in recent months. Capital One Financial Corp. (NYSE:COF) was in 64 hedge funds’ portfolios at the end of June. The all time high for this statistic is 59. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 59 hedge funds in our database with COF positions at the end of the first quarter. Our calculations also showed that COF isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
In the eyes of most stock holders, hedge funds are viewed as slow, outdated financial tools of years past. While there are over 8000 funds in operation at the moment, Our researchers hone in on the leaders of this group, approximately 850 funds. These money managers administer the lion’s share of the hedge fund industry’s total asset base, and by tailing their finest stock picks, Insider Monkey has discovered a few investment strategies that have historically defeated the broader indices. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website .
Louis Bacon Moore of Moore Capital
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Do Hedge Funds Think COF Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 64 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from the first quarter of 2020. On the other hand, there were a total of 55 hedge funds with a bullish position in COF a year ago. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
Among these funds, Pzena Investment Management held the most valuable stake in Capital One Financial Corp. (NYSE:COF), which was worth $699.6 million at the end of the second quarter. On the second spot was Fisher Asset Management which amassed $620.8 million worth of shares. Arrowstreet Capital, Eagle Capital Management, and Holocene Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position East Side Capital (RR Partners) allocated the biggest weight to Capital One Financial Corp. (NYSE:COF), around 10.72% of its 13F portfolio. Strycker View Capital is also relatively very bullish on the stock, designating 5.22 percent of its 13F equity portfolio to COF.
As industrywide interest jumped, key money managers have been driving this bullishness. East Side Capital (RR Partners), managed by Steven Richman, established the most valuable position in Capital One Financial Corp. (NYSE:COF). East Side Capital (RR Partners) had $99.6 million invested in the company at the end of the quarter. Michael A. Price and Amos Meron’s Empyrean Capital Partners also initiated a $30 million position during the quarter. The other funds with new positions in the stock are Louis Bacon’s Moore Global Investments, Daniel Johnson’s Gillson Capital, and Usman Waheed’s Strycker View Capital.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Capital One Financial Corp. (NYSE:COF) but similarly valued. These stocks are Illumina, Inc. (NASDAQ:ILMN), Equinor ASA (NYSE:EQNR), Colgate-Palmolive Company (NYSE:CL), The Blackstone Group Inc. (NYSE:BX), HCA Healthcare Inc (NYSE:HCA), ABB Ltd (NYSE:ABB), and Twilio Inc. (NYSE:TWLO). This group of stocks’ market valuations match COF’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ILMN | 51 | 1973287 | -1 |
| EQNR | 11 | 88633 | 3 |
| CL | 58 | 2368869 | 10 |
| BX | 54 | 2080104 | 5 |
| HCA | 60 | 2695782 | -2 |
| ABB | 15 | 658036 | 4 |
| TWLO | 98 | 7891057 | -1 |
| Average | 49.6 | 2536538 | 2.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 49.6 hedge funds with bullish positions and the average amount invested in these stocks was $2537 million. That figure was $4054 million in COF’s case. Twilio Inc. (NYSE:TWLO) is the most popular stock in this table. On the other hand Equinor ASA (NYSE:EQNR) is the least popular one with only 11 bullish hedge fund positions. Capital One Financial Corp. (NYSE:COF) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for COF is 70.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 25.7% in 2021 through September 27th and still beat the market by 6.2 percentage points. Hedge funds were also right about betting on COF as the stock returned 10.6% since the end of Q2 (through 9/27) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Capital One Financial Corp (NYSE:COF)
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Disclosure: None. This article was originally published at Insider Monkey.
