Why Capital One Financial (COF) Stock is a Compelling Investment Case

Miller Value Partners recently released its Q2 2020 Investor Letter, a copy of which you can download here. The Opportunity Equity Fund posted a return of 47.02% for the quarter (net of fees), outperforming its benchmark, the S&P 500 Index which returned 20.54% in the same quarter. You should check out Miller Value Partners’ top 5 stock picks for investors to buy right now, which could be the biggest winners of the stock market crash.

In the said letter, Miller Value Partners highlighted a few stocks and Capital One Financial Corp (NYSE:COF) is one of them. Capital One Financial Corp (NYSE:COF) is a financial services company. Year-to-date, Capital One Financial Corp (NYSE:COF) stock lost 36.1% and on July 27th it had a closing price of $65.74. Here is what Miller Value Partners’ said:

“Capital One is a company we’ve admired for a long time. Bill used to own it in Value Equity. CEO and Founder Rich Fairbanks built an admirable technology-enabled franchise that started in credit cards and subsequently expanded broadly into other financial services. Superior technology is core to everything the company does (check out their great annual shareholder letter for details). Since the IPO in 1994, Capital One has compounded capital at 11.1% per year,5 vastly outperforming the S&P 500 Financial Index (7.6% per year) and the broad S&P 500 (9.9% per year), even in a challenging market for financials. The company ended 2019 with tangible book value per share of $84 and earned $11 per share. In the short-term, the recession will hit earnings. But the strong balance sheet ensures it can not only survive, but continue to invest in improving the business for the long term. We think the stock is quite attractive in the high $50s, where it trades for less than 70% of tangible book value, 5x trailing earnings (good “normalized level” off which it can grow) and a 2.8% dividend yield.”

ALLY, Ally Bank Credit Card_2_3700x2960

Courtesy of Ally Financial

In Q1 2020, the number of bullish hedge fund positions on Capital One Financial Corp (NYSE:COF)  stock remained unchanged from the previous quarter (see the chart here). Our calculations showed that Capital One Financial Corp (NYSE:COF)  isn’t ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. You can subscribe to our free enewsletter below to receive our stories in your inbox:

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