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Is BPOP A Good Stock To Buy According To Hedge Funds?

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Asma UL Husna
·6 min read
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In this article we will take a look at whether hedge funds think Popular Inc (NASDAQ:BPOP) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

IsBPOP a good stock to buy? Prominent investors were in a pessimistic mood. The number of bullish hedge fund bets were trimmed by 3 in recent months. Popular Inc (NASDAQ:BPOP) was in 30 hedge funds' portfolios at the end of September. The all time high for this statistic is 33. 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 for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Bernard Horn of Polaris Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. You can subscribe to our free daily newsletter on our website. Now let's review the new hedge fund action surrounding Popular Inc (NASDAQ:BPOP).

Do Hedge Funds Think BPOP Is A Good Stock To Buy Now?

At the end of September, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards BPOP over the last 21 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Bernard Horn's Polaris Capital Management has the largest position in Popular Inc (NASDAQ:BPOP), worth close to $144.3 million, comprising 7.1% of its total 13F portfolio. On Polaris Capital Management's heels is Two Creeks Capital Management, led by Ryan Pedlow, holding a $72 million position; the fund has 4.7% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish contain Cliff Asness's AQR Capital Management, Ken Griffin's Citadel Investment Group and Steve Cohen's Point72 Asset Management. In terms of the portfolio weights assigned to each position Raging Capital Management allocated the biggest weight to Popular Inc (NASDAQ:BPOP), around 10.81% of its 13F portfolio. Polaris Capital Management is also relatively very bullish on the stock, designating 7.11 percent of its 13F equity portfolio to BPOP.

Since Popular Inc (NASDAQ:BPOP) has witnessed falling interest from the entirety of the hedge funds we track, we can see that there was a specific group of hedge funds that elected to cut their entire stakes last quarter. At the top of the heap, Matthew Lindenbaum's Basswood Capital dumped the largest investment of the 750 funds followed by Insider Monkey, valued at close to $1.1 million in stock, and Benjamin A. Smith's Laurion Capital Management was right behind this move, as the fund cut about $1.1 million worth. These transactions are interesting, as total hedge fund interest fell by 3 funds last quarter.

Let's go over hedge fund activity in other stocks similar to Popular Inc (NASDAQ:BPOP). These stocks are ACI Worldwide Inc (NASDAQ:ACIW), RBC Bearings Incorporated (NASDAQ:ROLL), SLM Corp (NASDAQ:SLM), Installed Building Products Inc (NYSE:IBP), Ormat Technologies, Inc. (NYSE:ORA), Companhia Paranaense de Energia - COPEL (NYSE:ELP), and nVent Electric plc (NYSE:NVT). This group of stocks' market values match BPOP's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ACIW,29,429393,7 ROLL,18,51655,1 SLM,22,630822,-10 IBP,20,116472,-1 ORA,19,198924,0 ELP,6,21608,-6 NVT,34,374896,7 Average,21.1,260539,-0.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.1 hedge funds with bullish positions and the average amount invested in these stocks was $261 million. That figure was $555 million in BPOP's case. nVent Electric plc (NYSE:NVT) is the most popular stock in this table. On the other hand Companhia Paranaense de Energia - COPEL (NYSE:ELP) is the least popular one with only 6 bullish hedge fund positions. Popular Inc (NASDAQ:BPOP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BPOP is 72.1. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on BPOP as the stock returned 52.8% since the end of Q3 (through 12/18) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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