While the market driven by short-term sentiment influenced by uncertainty regarding the future of the interest rate environment in the US, declining oil prices and the trade war with China, many smart money investors are keeping their optimism regarding the current bull run, while still hedging many of their long positions. However, as we know, big investors usually buy stocks with strong fundamentals, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Banco Macro SA (NYSE:BMA).
Is Banco Macro SA (NYSE:BMA) a buy, sell, or hold? The best stock pickers are getting less optimistic. The number of long hedge fund positions were trimmed by 4 in recent months. Our calculations also showed that bma isn't among the 30 most popular stocks among hedge funds. BMA was in 12 hedge funds' portfolios at the end of the third quarter of 2018. There were 16 hedge funds in our database with BMA positions at the end of the previous quarter.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 18 percentage points since May 2014 through December 3, 2018 (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.
We're going to take a look at the key hedge fund action regarding Banco Macro SA (NYSE:BMA).
How have hedgies been trading Banco Macro SA (NYSE:BMA)?
Heading into the fourth quarter of 2018, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards BMA over the last 13 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Odey Asset Management Group was the largest shareholder of Banco Macro SA (NYSE:BMA), with a stake worth $47.4 million reported as of the end of September. Trailing Odey Asset Management Group was EMS Capital, which amassed a stake valued at $26.4 million. Discovery Capital Management, Millennium Management, and LMR Partners were also very fond of the stock, giving the stock large weights in their portfolios.
Due to the fact that Banco Macro SA (NYSE:BMA) has faced falling interest from the smart money, logic holds that there is a sect of funds that decided to sell off their full holdings in the third quarter. Interestingly, Zach Schreiber's Point State Capital dumped the biggest stake of the 700 funds watched by Insider Monkey, totaling close to $28.7 million in stock. Peter Rathjens, Bruce Clarke and John Campbell's fund, Arrowstreet Capital, also sold off its stock, about $5.4 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 4 funds in the third quarter.
Let's now review hedge fund activity in other stocks similar to Banco Macro SA (NYSE:BMA). These stocks are SeaWorld Entertainment Inc (NYSE:SEAS), Diamond Offshore Drilling Inc (NYSE:DO), Murphy USA Inc. (NYSE:MUSA), and AlarmCom Holdings Inc (NASDAQ:ALRM). This group of stocks' market values are closest to BMA's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SEAS,22,375366,6 DO,19,103453,0 MUSA,19,173066,3 ALRM,12,259097,-3 Average,18,227746,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $228 million. That figure was $118 million in BMA's case. SeaWorld Entertainment Inc (NYSE:SEAS) is the most popular stock in this table. On the other hand AlarmCom Holdings Inc (NASDAQ:ALRM) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Banco Macro SA (NYSE:BMA) is even less popular than ALRM. Considering that hedge funds aren't fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn't behind this stock. This isn't necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None. This article was originally published at Insider Monkey.