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Were Hedge Funds Right About Deserting Banco Santander, S.A. (SAN)?

We at Insider Monkey have gone over 700 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article, we look at what those funds think of Banco Santander, S.A. (NYSE:SAN) based on that data.

Is Banco Santander, S.A. (NYSE:SAN) worth your attention right now? Money managers are selling. The number of bullish hedge fund bets shrunk by 1 in recent months. Our calculations also showed that SAN isn’t among the 30 most popular stocks among hedge funds. SAN was in 18 hedge funds’ portfolios at the end of December. There were 19 hedge funds in our database with SAN positions at the end of the previous quarter.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

RENAISSANCE TECHNOLOGIES

We’re going to check out the fresh hedge fund action encompassing Banco Santander, S.A. (NYSE:SAN).

What have hedge funds been doing with Banco Santander, S.A. (NYSE:SAN)?

At Q4’s end, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from the second quarter of 2018. On the other hand, there were a total of 17 hedge funds with a bullish position in SAN a year ago. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

SAN_mar2019

When looking at the institutional investors followed by Insider Monkey, Fisher Asset Management, managed by Ken Fisher, holds the most valuable position in Banco Santander, S.A. (NYSE:SAN). Fisher Asset Management has a $439.9 million position in the stock, comprising 0.6% of its 13F portfolio. The second largest stake is held by Cliff Asness of AQR Capital Management, with a $82.5 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors that hold long positions comprise Jim Simons’s Renaissance Technologies, Mike Masters’s Masters Capital Management and John W. Rogers’s Ariel Investments.

Seeing as Banco Santander, S.A. (NYSE:SAN) has faced a decline in interest from the aggregate hedge fund industry, it’s safe to say that there were a few hedge funds who were dropping their full holdings in the third quarter. Interestingly, David Halpert’s Prince Street Capital Management sold off the largest stake of the “upper crust” of funds monitored by Insider Monkey, worth about $5.3 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund cut about $5.1 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds in the third quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Banco Santander, S.A. (NYSE:SAN) but similarly valued. These stocks are CIGNA Corporation (NYSE:CI), Danaher Corporation (NYSE:DHR), ConocoPhillips (NYSE:COP), and Equinor ASA (NYSE:EQNR). All of these stocks’ market caps match SAN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CI 68 4557359 8
DHR 48 2127751 -3
COP 59 1984993 4
EQNR 13 341572 1
Average 47 2252919 2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 47 hedge funds with bullish positions and the average amount invested in these stocks was $2253 million. That figure was $698 million in SAN’s case. CIGNA Corporation (NYSE:CI) is the most popular stock in this table. On the other hand Equinor ASA (NYSE:EQNR) is the least popular one with only 13 bullish hedge fund positions. Banco Santander, S.A. (NYSE:SAN) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately SAN wasn’t in this group. Hedge funds that bet on SAN were disappointed as the stock returned 10.9% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.

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

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