Is Santander Consumer USA Holdings Inc (SC) Going to Burn These Hedge Funds?

In this article we will analyze whether Santander Consumer USA Holdings Inc (NYSE:SC) 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 Santander Consumer USA Holdings Inc (NYSE:SC) going to take off soon? Prominent investors were taking an optimistic view. The number of bullish hedge fund positions went up by 2 lately. Santander Consumer USA Holdings Inc (NYSE:SC) was in 23 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 35. Our calculations also showed that SC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 21 hedge funds in our database with SC positions at the end of the fourth 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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. 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 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Josh Friedman Canyon Capital

Joshua Friedman of Canyon Capital Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery 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. With all of this in mind let’s go over the recent hedge fund action encompassing Santander Consumer USA Holdings Inc (NYSE:SC).

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

At the end of the first quarter, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SC over the last 23 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Santander Consumer USA Holdings Inc (NYSE:SC) was held by Canyon Capital Advisors, which reported holding $80.8 million worth of stock at the end of December. It was followed by Arrowstreet Capital with a $46 million position. Other investors bullish on the company included Rubric Capital Management, Citadel Investment Group, and Water Street Capital. In terms of the portfolio weights assigned to each position Canyon Capital Advisors allocated the biggest weight to Santander Consumer USA Holdings Inc (NYSE:SC), around 3.21% of its 13F portfolio. Rubric Capital Management is also relatively very bullish on the stock, setting aside 2.47 percent of its 13F equity portfolio to SC.

As one would reasonably expect, some big names have been driving this bullishness. Rubric Capital Management, managed by David Rosen, created the largest position in Santander Consumer USA Holdings Inc (NYSE:SC). Rubric Capital Management had $42.3 million invested in the company at the end of the quarter. Gilchrist Berg’s Water Street Capital also initiated a $18.1 million position during the quarter. The following funds were also among the new SC investors: Dmitry Balyasny’s Balyasny Asset Management, D. E. Shaw’s D E Shaw, and Brandon Haley’s Holocene Advisors.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Santander Consumer USA Holdings Inc (NYSE:SC) but similarly valued. We will take a look at Arrow Electronics, Inc. (NYSE:ARW), Lightspeed POS Inc. (NYSE:LSPD), Berry Global Group Inc (NYSE:BERY), Globant SA (NYSE:GLOB), Acceleron Pharma Inc (NASDAQ:XLRN), Beyond Meat, Inc. (NASDAQ:BYND), and Polaris Inc. (NYSE:PII). This group of stocks’ market caps resemble SC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ARW 23 767932 -4
LSPD 21 643714 1
BERY 42 1404006 8
GLOB 17 323406 2
XLRN 31 1647100 -3
BYND 26 338693 -1
PII 29 510308 -2
Average 27 805023 0.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $805 million. That figure was $309 million in SC’s case. Berry Global Group Inc (NYSE:BERY) is the most popular stock in this table. On the other hand Globant SA (NYSE:GLOB) is the least popular one with only 17 bullish hedge fund positions. Santander Consumer USA Holdings Inc (NYSE:SC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SC is 38.7. 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 23.8% in 2021 through July 16th and still beat the market by 7.7 percentage points. A small number of hedge funds were also right about betting on SC as the stock returned 50.4% since the end of the first quarter (through 7/16) and outperformed the market by an even larger margin.

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