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Should You Avoid Popular Inc (BPOP)?

Abigail Fisher

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Popular Inc (NASDAQ:BPOP).

Popular Inc (NASDAQ:BPOP) has seen a decrease in hedge fund interest of late. BPOP was in 29 hedge funds' portfolios at the end of September. There were 30 hedge funds in our database with BPOP positions at the end of the previous quarter. Our calculations also showed that BPOP isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

Today there are a multitude of signals stock traders have at their disposal to grade publicly traded companies. Two of the best signals are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the best picks of the best investment managers can trounce the broader indices by a healthy margin (see the details here).

[caption id="attachment_745225" align="aligncenter" width="473"] Noam Gottesman of GLG Partners[/caption]

Noam Gottesman GLG Partners

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to take a look at the key hedge fund action regarding Popular Inc (NASDAQ:BPOP).

What have hedge funds been doing with Popular Inc (NASDAQ:BPOP)?

At the end of the third quarter, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards BPOP over the last 17 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

BPOP_dec2019

Among these funds, Polaris Capital Management held the most valuable stake in Popular Inc (NASDAQ:BPOP), which was worth $218.8 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $176.5 million worth of shares. Alyeska Investment Group, GLG Partners, and Arrowstreet Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Polaris Capital Management allocated the biggest weight to Popular Inc (NASDAQ:BPOP), around 9.83% of its portfolio. Shoals Capital Management is also relatively very bullish on the stock, earmarking 9.3 percent of its 13F equity portfolio to BPOP.

Seeing as Popular Inc (NASDAQ:BPOP) has faced a decline in interest from the aggregate hedge fund industry, it's safe to say that there exists a select few funds that decided to sell off their entire stakes heading into Q4. It's worth mentioning that Dmitry Balyasny's Balyasny Asset Management said goodbye to the biggest investment of the 750 funds followed by Insider Monkey, valued at close to $1 million in stock, and Michael Gelband's ExodusPoint Capital was right behind this move, as the fund dropped about $0.6 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 1 funds heading into Q4.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Popular Inc (NASDAQ:BPOP) but similarly valued. These stocks are First Citizens BancShares Inc. (NASDAQ:FCNCA), Nordstrom, Inc. (NYSE:JWN), ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD), and Kemper Corporation (NYSE:KMPR). This group of stocks' market caps match BPOP's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FCNCA,16,161401,-1 JWN,20,178075,-7 ACAD,26,1910582,5 KMPR,19,154935,0 Average,20.25,601248,-0.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $601 million. That figure was $753 million in BPOP's case. ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) is the most popular stock in this table. On the other hand First Citizens BancShares Inc. (NASDAQ:FCNCA) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Popular Inc (NASDAQ:BPOP) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately BPOP wasn't nearly as popular as these 20 stocks and hedge funds that were betting on BPOP were disappointed as the stock returned 2.3% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.

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

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