We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Santander Consumer USA Holdings Inc (NYSE:SC) and determine whether hedge funds skillfully traded this stock.
Hedge fund interest in Santander Consumer USA Holdings Inc (NYSE:SC) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that SC isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare SC to other stocks including Bunge Limited (NYSE:BG), Aluminum Corp. of China Limited (NYSE:ACH), and Store Capital Corporation (NYSE:STOR) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
To most stock holders, hedge funds are assumed to be worthless, outdated financial tools of years past. While there are more than 8000 funds with their doors open at the moment, Our experts hone in on the elite of this group, approximately 850 funds. It is estimated that this group of investors orchestrate the majority of the smart money’s total asset base, and by watching their highest performing picks, Insider Monkey has figured out a few investment strategies that have historically beaten Mr. Market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
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 are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. With all of this in mind we’re going to analyze the recent hedge fund action encompassing Santander Consumer USA Holdings Inc (NYSE:SC).
Hedge fund activity in Santander Consumer USA Holdings Inc (NYSE:SC)
Heading into the third quarter of 2020, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 26 hedge funds with a bullish position in SC a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Windacre Partnership held the most valuable stake in Santander Consumer USA Holdings Inc (NYSE:SC), which was worth $255.6 million at the end of the third quarter. On the second spot was Canyon Capital Advisors which amassed $228.3 million worth of shares. Arrowstreet Capital, Water Street Capital, and AQR Capital Management 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 Windacre Partnership allocated the biggest weight to Santander Consumer USA Holdings Inc (NYSE:SC), around 7.68% of its 13F portfolio. Canyon Capital Advisors is also relatively very bullish on the stock, dishing out 7.63 percent of its 13F equity portfolio to SC.
Because Santander Consumer USA Holdings Inc (NYSE:SC) has faced falling interest from the entirety of the hedge funds we track, it’s easy to see that there exists a select few fund managers that slashed their positions entirely last quarter. At the top of the heap, Robert Pohly’s Samlyn Capital sold off the largest stake of all the hedgies watched by Insider Monkey, totaling about $26.3 million in stock. Renaissance Technologies, also dumped its stock, about $4.8 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review 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 Bunge Limited (NYSE:BG), Aluminum Corp. of China Limited (NYSE:ACH), Store Capital Corporation (NYSE:STOR), Schrodinger, Inc. (NASDAQ:SDGR), Healthcare Trust Of America Inc (NYSE:HTA), Sibanye Stillwater Limited (NYSE:SBSW), and Cenovus Energy Inc (NYSE:CVE). 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|
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As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $430 million. That figure was $561 million in SC’s case. Bunge Limited (NYSE:BG) is the most popular stock in this table. On the other hand Aluminum Corp. of China Limited (NYSE:ACH) is the least popular one with only 6 bullish hedge fund positions. Santander Consumer USA Holdings Inc (NYSE:SC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SC is 22.1. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately SC wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on SC were disappointed as the stock returned 0% in Q3 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.