Is Capital One (COF) Stock A Buy or Sell?

In this article we will analyze whether Capital One Financial Corp. (NYSE:COF) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Is Capital One (COF) stock a buy or sell? Money managers were taking an optimistic view. The number of bullish hedge fund positions rose by 14 lately. Capital One Financial Corp. (NYSE:COF) was in 56 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 55. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that COF isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 42 hedge funds in our database with COF positions at the end of the third quarter.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. 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 homepage (or at the end of this article). Keeping this in mind we’re going to take a peek at the new hedge fund action encompassing Capital One Financial Corp. (NYSE:COF).

Do Hedge Funds Think COF Is A Good Stock To Buy Now?

At the end of the fourth quarter, a total of 56 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 33% from one quarter earlier. On the other hand, there were a total of 50 hedge funds with a bullish position in COF a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their stakes meaningfully (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 $577.5 million at the end of the fourth quarter. On the second spot was Eagle Capital Management which amassed $404.2 million worth of shares. Citadel Investment Group, Fisher Asset Management, and Point State Capital 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 Strycker View Capital allocated the biggest weight to Capital One Financial Corp. (NYSE:COF), around 7.33% of its 13F portfolio. Antipodes Partners is also relatively very bullish on the stock, setting aside 7 percent of its 13F equity portfolio to COF.

As one would reasonably expect, specific money managers were breaking ground themselves. Holocene Advisors, managed by Brandon Haley, established the most outsized position in Capital One Financial Corp. (NYSE:COF). Holocene Advisors had $63.3 million invested in the company at the end of the quarter. Josh Donfeld and David Rogers’s Castle Hook Partners also made a $60.6 million investment in the stock during the quarter. The other funds with new positions in the stock are James Parsons’s Junto Capital Management, Kevin D. Eng’s Columbus Hill Capital Management, and Dmitry Balyasny’s Balyasny Asset Management.

Let’s now review hedge fund activity in other stocks similar to Capital One Financial Corp. (NYSE:COF). We will take a look at Roper Technologies Inc. (NYSE:ROP), Keurig Dr Pepper Inc. (NASDAQ:KDP), The Blackstone Group Inc. (NYSE:BX), NXP Semiconductors NV (NASDAQ:NXPI), Peloton Interactive, Inc. (NASDAQ:PTON), Vodafone Group Plc (NASDAQ:VOD), and Palantir Technologies Inc. (NYSE:PLTR). This group of stocks’ market caps are closest to COF’s market cap.

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As you can see these stocks had an average of 43.9 hedge funds with bullish positions and the average amount invested in these stocks was $2064 million. That figure was $3028 million in COF’s case. NXP Semiconductors NV (NASDAQ:NXPI) is the most popular stock in this table. On the other hand Vodafone Group Plc (NASDAQ:VOD) is the least popular one with only 17 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 79.8. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on COF as the stock returned 28.3% since the end of Q4 (through 3/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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