Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money 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 (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Barclays PLC (NYSE:BCS).
Barclays PLC (NYSE:BCS) investors should be aware of a decrease in enthusiasm from smart money recently. Our calculations also showed that BCS isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To most shareholders, hedge funds are perceived as worthless, outdated investment vehicles of yesteryear. While there are over 8000 funds with their doors open at present, We look at the upper echelon of this group, around 850 funds. It is estimated that this group of investors manage the majority of the hedge fund industry’s total asset base, and by keeping an eye on their first-class equity investments, Insider Monkey has figured out numerous investment strategies that have historically outstripped the broader indices. 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 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Boykin Curry of Eagle Capital
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. Keeping this in mind let’s take a peek at the latest hedge fund action encompassing Barclays PLC (NYSE:BCS).
How have hedgies been trading Barclays PLC (NYSE:BCS)?
At Q4’s end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -27% from the previous quarter. By comparison, 10 hedge funds held shares or bullish call options in BCS 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.
The largest stake in Barclays PLC (NYSE:BCS) was held by Eagle Capital Management, which reported holding $53.8 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $24.5 million position. Other investors bullish on the company included Masters Capital Management, Arrowstreet Capital, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Springhouse Capital Management allocated the biggest weight to Barclays PLC (NYSE:BCS), around 1.93% of its 13F portfolio. Stamos Capital is also relatively very bullish on the stock, setting aside 1.22 percent of its 13F equity portfolio to BCS.
Due to the fact that Barclays PLC (NYSE:BCS) has faced declining sentiment from the entirety of the hedge funds we track, logic holds that there was a specific group of money managers that decided to sell off their full holdings by the end of the third quarter. At the top of the heap, D. E. Shaw’s D E Shaw cut the biggest stake of the 750 funds tracked by Insider Monkey, worth an estimated $0.5 million in stock, and Mike Vranos’s Ellington was right behind this move, as the fund dropped about $0.2 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 4 funds by the end of the third quarter.
Let’s now review hedge fund activity in other stocks similar to Barclays PLC (NYSE:BCS). We will take a look at Ecopetrol S.A. (NYSE:EC), Keurig Dr Pepper Inc. (NASDAQ:KDP), The Dow Chemical Company (NYSE:DOW), and Autodesk, Inc. (NASDAQ:ADSK). All of these stocks’ market caps are closest to BCS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EC | 11 | 229258 | 1 |
| KDP | 26 | 593887 | 3 |
| DOW | 34 | 165271 | -3 |
| ADSK | 64 | 3357850 | 16 |
| Average | 33.75 | 1086567 | 4.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.75 hedge funds with bullish positions and the average amount invested in these stocks was $1087 million. That figure was $116 million in BCS’s case. Autodesk, Inc. (NASDAQ:ADSK) is the most popular stock in this table. On the other hand Ecopetrol S.A. (NYSE:EC) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Barclays PLC (NYSE:BCS) is even less popular than EC. Hedge funds dodged a bullet by taking a bearish stance towards BCS. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but managed to beat the market by 3.1 percentage points. Unfortunately BCS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); BCS investors were disappointed as the stock returned -36% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in Q1.
Disclosure: None. This article was originally published at Insider Monkey.
