Did Hedge Funds Make The Right Call On IDACORP Inc (IDA) ?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtIDACORP Inc (NYSE:IDA) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Hedge fund interest in IDACORP Inc (NYSE:IDA) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Store Capital Corporation (NYSE:STOR), Stericycle Inc (NASDAQ:SRCL), and Life Storage, Inc. (NYSE:LSI) to gather more data points. Our calculations also showed that IDA 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.

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 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

David E. Shaw of D.E. Shaw

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. 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. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. With all of this in mind we’re going to analyze the latest hedge fund action encompassing IDACORP Inc (NYSE:IDA).

What does smart money think about IDACORP Inc (NYSE:IDA)?

At the end of the first quarter, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. By comparison, 18 hedge funds held shares or bullish call options in IDA a year ago. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

More specifically, Renaissance Technologies was the largest shareholder of IDACORP Inc (NYSE:IDA), with a stake worth $99.7 million reported as of the end of September. Trailing Renaissance Technologies was Citadel Investment Group, which amassed a stake valued at $43.4 million. AQR Capital Management, D E Shaw, and Fisher Asset Management 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 Brasada Capital Management allocated the biggest weight to IDACORP Inc (NYSE:IDA), around 0.44% of its 13F portfolio. Cinctive Capital Management is also relatively very bullish on the stock, designating 0.44 percent of its 13F equity portfolio to IDA.

Because IDACORP Inc (NYSE:IDA) has experienced bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there exists a select few hedge funds who sold off their positions entirely in the first quarter. Interestingly, Mika Toikka’s AlphaCrest Capital Management said goodbye to the largest stake of all the hedgies watched by Insider Monkey, comprising close to $0.9 million in stock, and Matthew Tewksbury’s Stevens Capital Management was right behind this move, as the fund said goodbye to about $0.7 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as IDACORP Inc (NYSE:IDA) but similarly valued. We will take a look at Store Capital Corporation (NYSE:STOR), Stericycle Inc (NASDAQ:SRCL), Life Storage, Inc. (NYSE:LSI), and ONE Gas Inc (NYSE:OGS). This group of stocks’ market caps match IDA’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $307 million. That figure was $282 million in IDA’s case. Store Capital Corporation (NYSE:STOR) is the most popular stock in this table. On the other hand ONE Gas Inc (NYSE:OGS) is the least popular one with only 16 bullish hedge fund positions. IDACORP Inc (NYSE:IDA) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately IDA wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on IDA were disappointed as the stock returned 0.3% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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