The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Santander Consumer USA Holdings Inc (NYSE:SC) based on those filings.
Santander Consumer USA Holdings Inc (NYSE:SC) was in 20 hedge funds' portfolios at the end of March. SC has experienced a decrease in hedge fund interest of late. There were 27 hedge funds in our database with SC positions at the end of the previous quarter. Our calculations also showed that SC isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_324853" align="aligncenter" width="400"] Joshua Friedman of Canyon Capital Advisors[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let's take a look at the latest hedge fund action encompassing Santander Consumer USA Holdings Inc (NYSE:SC).
Hedge fund activity in Santander Consumer USA Holdings Inc (NYSE:SC)
At Q1's end, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of -26% from the fourth quarter of 2019. By comparison, 22 hedge funds held shares or bullish call options in SC a year ago. With hedgies' sentiment swirling, there exists an "upper tier" of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Canyon Capital Advisors, managed by Joshua Friedman and Mitchell Julis, holds the most valuable position in Santander Consumer USA Holdings Inc (NYSE:SC). Canyon Capital Advisors has a $192.9 million position in the stock, comprising 6.8% of its 13F portfolio. On Canyon Capital Advisors's heels is Windacre Partnership, led by Snehal Amin, holding a $156.2 million position; the fund has 7% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish contain Robert Pohly's Samlyn Capital, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and Matthew Hulsizer's PEAK6 Capital Management. In terms of the portfolio weights assigned to each position Windacre Partnership allocated the biggest weight to Santander Consumer USA Holdings Inc (NYSE:SC), around 6.97% of its 13F portfolio. Canyon Capital Advisors is also relatively very bullish on the stock, designating 6.81 percent of its 13F equity portfolio to SC.
Due to the fact that Santander Consumer USA Holdings Inc (NYSE:SC) has faced falling interest from hedge fund managers, it's safe to say that there were a few hedge funds that decided to sell off their full holdings in the first quarter. At the top of the heap, Steve Cohen's Point72 Asset Management dumped the biggest position of the "upper crust" of funds watched by Insider Monkey, worth an estimated $29.9 million in stock. George Soros's fund, Soros Fund Management, also dropped its stock, about $7.6 million worth. These transactions are interesting, as total hedge fund interest was cut by 7 funds in the first quarter.
Let's now take a look at hedge fund activity in other stocks similar to Santander Consumer USA Holdings Inc (NYSE:SC). We will take a look at Nielsen Holdings plc (NYSE:NLSN), MKS Instruments, Inc. (NASDAQ:MKSI), The Boston Beer Company Inc (NYSE:SAM), and Berry Global Group Inc (NYSE:BERY). This group of stocks' market values resemble SC's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NLSN,33,762761,4 MKSI,27,296258,-1 SAM,24,557916,-2 BERY,34,1206553,-13 Average,29.5,705872,-3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.5 hedge funds with bullish positions and the average amount invested in these stocks was $706 million. That figure was $424 million in SC's case. Berry Global Group Inc (NYSE:BERY) is the most popular stock in this table. On the other hand The Boston Beer Company Inc (NYSE:SAM) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks Santander Consumer USA Holdings Inc (NYSE:SC) is even less popular than SAM. Hedge funds clearly dropped the ball on SC as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.2% in 2020 through June 17th and still beat the market by 14.8 percentage points. A small number of hedge funds were also right about betting on SC as the stock returned 42.2% so far in the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.