Is BNP Paribas SA (BNPQY) A Smart Long-Term Buy?

ClearBridge Investments, an investment management firm, published its “International Growth ADR Strategy” second quarter 2021 investor letter – a copy of which can be downloaded here. The ClearBridge International Growth ADR Strategy outperformed its MSCI EAFE Index benchmark. The Strategy delivered gains across seven of the 10 sectors in which it was invested (out of 11 total), with the consumer staples, IT and consumer discretionary sectors the primary contributors. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

In the Q2 2021 investor letter of ClearBridge Investments, the fund mentioned BNP Paribas SA (NYSE: BNPQY), and discussed its stance on the firm. BNP Paribas SA is a Paris, France-based retail banking company, that currently has an $75.2 billion market capitalization. BNPQY delivered a 14.06% return since the beginning of the year, extending its 12-month revenues to 36.48%. The stock closed at $30.08 per share on July 13, 2021.

Here is what ClearBridge Investments has to say about BNP Paribas SA in its Q2 2021 investor letter:

” In banking, we initiated a position in BNP Paribas, the largest lender in Europe. We expect another earnings beat from the bank in the second quarter, mainly due to lower cost and provisioning levels. BNP is well-capitalized and could resume dividend payments in the fourth quarter. The likely granting of permission by the ECB for banks to reduce their capital should lead to further rerating of BNP and the entire sector.”



Based on our calculations, BNP Paribas SA (NYSE: BNPQY) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. BNPQY delivered a -2.90% return in the past 3 months.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 S&P 500 ETFs by 115 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 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.

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