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Hedge Funds Hate These 5 Stocks -- but Should You?

Wells Fargo

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Wells Fargo (WFC), on the other hand, hasn't lost its luster as the best of the big banks -- unless you're a hedge fund. Fund managers offloaded 6.96 million shares of the San Francisco-based bank, cutting their collective stakes in the stock by a quarter-billion dollars.

Wells' biggest advantage right now is that it avoided the big mistakes its peers made heading in to the Great Recession. WFC had the most exposure to retail and commercial banking heading into 2007, and the relative lack of toxic assets on its balance sheet gave it the wherewithal to greatly increase its scale by acquiring Wachovia on the cheap in 2008. Now a bigger, stronger Wells Fargo is well-positioned to ride out this low-rate environment, and start raking it in when the Fed starts to target higher rates down the line.

There are some speed bumps in Wells' strategy, to be sure. As a big bank, the firm's balance sheet is riddled with at least a couple tears. And increased regulation means that management can't make stewardship decisions (like a dividend hike) without asking Uncle Sam first.

Ultimately, everyone has eyes on WFC, and there isn't a big edge in shares right now. That said, relative strength remains stellar in the financial sector, and investors could find worse exposure to financials than this stock. Even if hedge funds are trying to move their money to more exciting opportunities, they mistimed selling WFC.

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