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Is COF A Good Stock To Buy Now?

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Reymerlyn Martin
·6 min read
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With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was Capital One Financial Corp. (NYSE:COF).

Is COF a good stock to buy now? Capital One Financial Corp. (NYSE:COF) investors should be aware of a decrease in hedge fund sentiment recently. Capital One Financial Corp. (NYSE:COF) was in 42 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 55. There were 55 hedge funds in our database with COF positions at the end of the second quarter. Our calculations also showed that COF 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 eyes of most investors, hedge funds are perceived as unimportant, old financial tools of the past. While there are more than 8000 funds trading at present, Our researchers hone in on the moguls of this club, approximately 850 funds. Most estimates calculate that this group of people orchestrate the majority of all hedge funds' total asset base, and by shadowing their finest picks, Insider Monkey has unearthed numerous investment strategies that have historically surpassed the market. Insider Monkey's flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .

Boykin Curry EAGLE CAPITAL MANAGEMENT
Boykin Curry EAGLE CAPITAL MANAGEMENT

Boykin Curry of Eagle Capital

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 view the latest hedge fund action encompassing Capital One Financial Corp. (NYSE:COF).

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

At Q3's end, a total of 42 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -24% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards COF over the last 21 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

According to Insider Monkey's hedge fund database, Lone Pine Capital has the number one position in Capital One Financial Corp. (NYSE:COF), worth close to $738.6 million, comprising 3.2% of its total 13F portfolio. Sitting at the No. 2 spot is Richard S. Pzena of Pzena Investment Management, with a $434.7 million position; 2.7% of its 13F portfolio is allocated to the company. Remaining members of the smart money with similar optimism include Boykin Curry's Eagle Capital Management, Jacob Mitchell's Antipodes Partners and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Antipodes Partners allocated the biggest weight to Capital One Financial Corp. (NYSE:COF), around 6.87% of its 13F portfolio. Tegean Capital Management is also relatively very bullish on the stock, setting aside 5.09 percent of its 13F equity portfolio to COF.

Seeing as Capital One Financial Corp. (NYSE:COF) has faced declining sentiment from the smart money, logic holds that there is a sect of fund managers that elected to cut their full holdings in the third quarter. It's worth mentioning that Renaissance Technologies dropped the biggest position of the "upper crust" of funds monitored by Insider Monkey, totaling about $29.4 million in stock, and Jeffrey Altman's Owl Creek Asset Management was right behind this move, as the fund cut about $26.5 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 13 funds in the third quarter.

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. These stocks are Synopsys, Inc. (NASDAQ:SNPS), Mizuho Financial Group Inc. (NYSE:MFG), Amphenol Corporation (NYSE:APH), TE Connectivity Ltd. (NYSE:TEL), SYSCO Corporation (NYSE:SYY), Cummins Inc. (NYSE:CMI), and IHS Markit Ltd. (NYSE:INFO). This group of stocks' market values match COF's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SNPS,32,1058943,-2 MFG,5,12057,-3 APH,49,1163214,7 TEL,33,2008750,-6 SYY,33,2199383,-9 CMI,49,673230,11 INFO,44,1283750,0 Average,35,1199904,-0.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 35 hedge funds with bullish positions and the average amount invested in these stocks was $1200 million. That figure was $2539 million in COF's case. Amphenol Corporation (NYSE:APH) is the most popular stock in this table. On the other hand Mizuho Financial Group Inc. (NYSE:MFG) is the least popular one with only 5 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. Our overall hedge fund sentiment score for COF is 57. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on COF as the stock returned 29.1% since the end of Q3 (through 12/8) 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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