Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant out-performance. That’s why we pay special attention to hedge fund activity in these stocks.
Is Capital One Financial Corp. (NYSE:COF) the right investment to pursue these days? Investors who are in the know are buying. The number of long hedge fund positions went up by 12 in recent months. COF was in 53 hedge funds’ portfolios at the end of the third quarter of 2015. There were 41 hedge funds in our database with COF positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as China Telecom Corporation Limited (ADR) (NYSE:CHA), ABB Ltd (ADR) (NYSE:ABB), and Credit Suisse Group AG (ADR) (NYSE:CS) to gather more data points.
Follow Capital One Financial Corp (NYSE:COF)
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Keeping this in mind, we’re going to analyze the recent action surrounding Capital One Financial Corp. (NYSE:COF).
What does the smart money think about Capital One Financial Corp. (NYSE:COF)?
At Q3’s end, a total of 53 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 29% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Columbus Circle Investors has the most valuable position in Capital One Financial Corp. (NYSE:COF), worth close to $206.8 million, comprising 1.7% of its total 13F portfolio. Sitting at the No. 2 spot is AQR Capital Management, managed by Cliff Asness, which holds a $171.9 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish comprise Thomas E. Claugus’s GMT Capital, Michael Messner’s Seminole Capital (Investment Mgmt) and Anand Parekh’s Alyeska Investment Group.
With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Alyeska Investment Group, managed by Anand Parekh, initiated the most valuable position in Capital One Financial Corp. (NYSE:COF). Alyeska Investment Group had $57.2 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $27.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Peter Muller’s PDT Partners, Michael Barnes and Arif Inayatullah’s Tricadia Capital Management, and Dmitry Balyasny’s Balyasny Asset Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Capital One Financial Corp. (NYSE:COF) but similarly valued. We will take a look at China Telecom Corporation Limited (ADR) (NYSE:CHA), ABB Ltd (ADR) (NYSE:ABB), Credit Suisse Group AG (ADR) (NYSE:CS), and LyondellBasell Industries NV (NYSE:LYB). This group of stocks’ market caps are closest to COF’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CHA | 4 | 6297 | -1 |
| ABB | 9 | 163110 | -2 |
| CS | 7 | 271645 | 1 |
| LYB | 57 | 3836230 | -4 |
As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $1,069 million. That figure was $1,466 million in COF’s case. LyondellBasell Industries NV (NYSE:LYB) is the most popular stock in this table. On the other hand China Telecom Corporation Limited (ADR) (NYSE:CHA) is the least popular one with only 4 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard LYB might be a better candidate to consider a long position.
