The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on September 30th, about a month before the elections. We at Insider Monkey have made an extensive database of more than 817 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded The Bank of Nova Scotia (NYSE:BNS) based on those filings.
Is BNS a good stock to buy now? The Bank of Nova Scotia (NYSE:BNS) has experienced an increase in support from the world’s most elite money managers of late. The Bank of Nova Scotia (NYSE:BNS) was in 14 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 17. There were 13 hedge funds in our database with BNS positions at the end of the second quarter. Our calculations also showed that BNS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
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 66 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. You can subscribe to our free daily newsletter on our website. Now let’s review the fresh hedge fund action surrounding The Bank of Nova Scotia (NYSE:BNS).
Do Hedge Funds Think BNS Is A Good Stock To Buy Now?
At the end of September, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in BNS over the last 21 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of The Bank of Nova Scotia (NYSE:BNS), with a stake worth $95.8 million reported as of the end of September. Trailing Renaissance Technologies was Galibier Capital Management, which amassed a stake valued at $14.6 million. Two Sigma Advisors, D E Shaw, and Fairfax Financial Holdings 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 Galibier Capital Management allocated the biggest weight to The Bank of Nova Scotia (NYSE:BNS), around 3.44% of its 13F portfolio. Fairfax Financial Holdings is also relatively very bullish on the stock, setting aside 0.58 percent of its 13F equity portfolio to BNS.
As aggregate interest increased, specific money managers were leading the bulls’ herd. ExodusPoint Capital, managed by Michael Gelband, established the most valuable position in The Bank of Nova Scotia (NYSE:BNS). ExodusPoint Capital had $1.2 million invested in the company at the end of the quarter. Murray Stahl’s Horizon Asset Management also initiated a $0.4 million position during the quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as The Bank of Nova Scotia (NYSE:BNS) but similarly valued. We will take a look at Barrick Gold Corporation (NYSE:GOLD), Brookfield Asset Management Inc. (NYSE:BAM), Edwards Lifesciences Corporation (NYSE:EW), China Petroleum & Chemical Corp (NYSE:SNP), Lam Research Corporation (NASDAQ:LRCX), Waste Management, Inc. (NYSE:WM), and Aon plc (NYSE:AON). All of these stocks’ market caps are similar to BNS’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 40.9 hedge funds with bullish positions and the average amount invested in these stocks was $2282 million. That figure was $176 million in BNS’s case. Lam Research Corporation (NASDAQ:LRCX) is the most popular stock in this table. On the other hand China Petroleum & Chemical Corp (NYSE:SNP) is the least popular one with only 8 bullish hedge fund positions. The Bank of Nova Scotia (NYSE:BNS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BNS is 37.1. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on BNS as the stock returned 30.3% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.