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We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Melvin Capital's recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Banco de Chile (NYSE:BCH).
Is Banco de Chile (NYSE:BCH) a good investment today? Investors who are in the know were betting on the stock. The number of long hedge fund positions improved by 2 recently. Banco de Chile (NYSE:BCH) was in 5 hedge funds' portfolios at the end of March. The all time high for this statistic is 10. Our calculations also showed that BCH isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 3 hedge funds in our database with BCH positions at the end of the fourth 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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.
Ryan Tolkin, CIO of Schonfeld Strategic Advisors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $23 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we're going to take a peek at the new hedge fund action regarding Banco de Chile (NYSE:BCH).
Do Hedge Funds Think BCH Is A Good Stock To Buy Now?
At first quarter's end, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of 67% from the fourth quarter of 2020. On the other hand, there were a total of 4 hedge funds with a bullish position in BCH a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Banco de Chile (NYSE:BCH) was held by Renaissance Technologies, which reported holding $43.1 million worth of stock at the end of December. It was followed by DPM Capital with a $7 million position. Other investors bullish on the company included AQR Capital Management, Schonfeld Strategic Advisors, and Citadel Investment Group. In terms of the portfolio weights assigned to each position DPM Capital allocated the biggest weight to Banco de Chile (NYSE:BCH), around 4.56% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.05 percent of its 13F equity portfolio to BCH.
Now, key money managers have jumped into Banco de Chile (NYSE:BCH) headfirst. Schonfeld Strategic Advisors, managed by Ryan Tolkin (CIO), initiated the most outsized position in Banco de Chile (NYSE:BCH). Schonfeld Strategic Advisors had $0.3 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also initiated a $0.3 million position during the quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Banco de Chile (NYSE:BCH) but similarly valued. These stocks are Sibanye Stillwater Limited (NYSE:SBSW), Host Hotels and Resorts Inc (NASDAQ:HST), Fidelity National Financial Inc (NYSE:FNF), Tuya Inc. (NYSE:TUYA), Zai Lab Limited (NASDAQ:ZLAB), DaVita Inc (NYSE:DVA), and Autohome Inc (NYSE:ATHM). This group of stocks' market values resemble BCH's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SBSW,16,272595,-1 HST,25,240687,3 FNF,39,1164238,-1 TUYA,15,231919,15 ZLAB,32,666075,2 DVA,34,4398979,2 ATHM,18,588993,2 Average,25.6,1080498,3.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.6 hedge funds with bullish positions and the average amount invested in these stocks was $1080 million. That figure was $53 million in BCH's case. Fidelity National Financial Inc (NYSE:FNF) is the most popular stock in this table. On the other hand Tuya Inc. (NYSE:TUYA) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Banco de Chile (NYSE:BCH) is even less popular than TUYA. Our overall hedge fund sentiment score for BCH is 22. 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. Hedge funds dodged a bullet by taking a bearish stance towards BCH. Our calculations showed that the top 10 most popular hedge fund stocks returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th but managed to beat the market again by 6.1 percentage points. Unfortunately BCH wasn't nearly as popular as these 5 stocks (hedge fund sentiment was very bearish); BCH investors were disappointed as the stock returned -16.2% since the end of the first quarter (through 6/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.