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Where Do Hedge Funds Stand On Popular Inc (BPOP)?

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Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Popular Inc (NASDAQ:BPOP)? The smart money sentiment can provide an answer to this question.

Is Popular Inc (NASDAQ:BPOP) a buy, sell, or hold? The smart money was in a pessimistic mood. The number of long hedge fund bets were trimmed by 1 lately. Popular Inc (NASDAQ:BPOP) was in 34 hedge funds' portfolios at the end of March. The all time high for this statistic is 35. Our calculations also showed that BPOP isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Donald Sussman Paloma Partners
Donald Sussman Paloma Partners

Donald Sussman of Paloma Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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 let's review the new hedge fund action encompassing Popular Inc (NASDAQ:BPOP).

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

At Q1's end, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from the previous quarter. On the other hand, there were a total of 28 hedge funds with a bullish position in BPOP a year ago. With hedge funds' capital changing hands, there exists an "upper tier" of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

Is BPOP A Good Stock To Buy?
Is BPOP A Good Stock To Buy?

Among these funds, Polaris Capital Management held the most valuable stake in Popular Inc (NASDAQ:BPOP), which was worth $280.7 million at the end of the fourth quarter. On the second spot was Citadel Investment Group which amassed $123.8 million worth of shares. AQR Capital Management, Arctis Global, 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 Arctis Global allocated the biggest weight to Popular Inc (NASDAQ:BPOP), around 10.2% of its 13F portfolio. Polaris Capital Management is also relatively very bullish on the stock, designating 9.21 percent of its 13F equity portfolio to BPOP.

Due to the fact that Popular Inc (NASDAQ:BPOP) has witnessed a decline in interest from the smart money, logic holds that there is a sect of hedgies that slashed their positions entirely last quarter. It's worth mentioning that Renaissance Technologies dumped the biggest position of the "upper crust" of funds monitored by Insider Monkey, worth about $6.9 million in stock. David Harding's fund, Winton Capital Management, also said goodbye to its stock, about $1.4 million worth. These moves are interesting, as total hedge fund interest fell by 1 funds last quarter.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Popular Inc (NASDAQ:BPOP) but similarly valued. We will take a look at SYNNEX Corporation (NYSE:SNX), Sarepta Therapeutics Inc (NASDAQ:SRPT), Duck Creek Technologies, Inc. (NASDAQ:DCT), First Industrial Realty Trust, Inc. (NYSE:FR), Louisiana-Pacific Corporation (NYSE:LPX), Colfax Corporation (NYSE:CFX), and New York Community Bancorp, Inc. (NYSE:NYCB). All of these stocks' market caps resemble BPOP's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SNX,15,614677,-9 SRPT,33,526911,-4 DCT,19,310721,-3 FR,20,416925,-6 LPX,30,771996,-11 CFX,49,1009256,13 NYCB,25,329163,0 Average,27.3,568521,-2.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.3 hedge funds with bullish positions and the average amount invested in these stocks was $569 million. That figure was $874 million in BPOP's case. Colfax Corporation (NYSE:CFX) is the most popular stock in this table. On the other hand SYNNEX Corporation (NYSE:SNX) is the least popular one with only 15 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 61.1. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 19.3% in 2021 through June 25th and still beat the market by 4.8 percentage points. Hedge funds were also right about betting on BPOP, though not to the same extent, as the stock returned 11.8% since Q1 (through June 25th) and outperformed the market as well.

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