Did Hedge Funds Make The Right Call On International Flavors & Fragrances Inc (IFF) ?

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 thoughtInternational Flavors & Fragrances Inc (NYSE:IFF) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

International Flavors & Fragrances Inc (NYSE:IFF) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 28 hedge funds’ portfolios at the end of the first quarter of 2020. At the end of this article we will also compare IFF to other stocks including Broadridge Financial Solutions, Inc. (NYSE:BR), Teledyne Technologies Incorporated (NYSE:TDY), and Nucor Corporation (NYSE:NUE) to get a better sense of its popularity.

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most investors, hedge funds are assumed to be underperforming, outdated financial vehicles of the past. While there are more than 8000 funds trading at present, Our researchers look at the aristocrats of this club, about 850 funds. Most estimates calculate that this group of people command the lion’s share of the hedge fund industry’s total asset base, and by keeping an eye on their first-class equity investments, Insider Monkey has identified various investment strategies that have historically outrun the broader indices. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Tom Gayner of Markel Gayner Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s check out the key hedge fund action surrounding International Flavors & Fragrances Inc (NYSE:IFF).

How are hedge funds trading International Flavors & Fragrances Inc (NYSE:IFF)?

Heading into the second quarter of 2020, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the fourth quarter of 2019. On the other hand, there were a total of 16 hedge funds with a bullish position in IFF a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Mario Gabelli’s GAMCO Investors has the most valuable position in International Flavors & Fragrances Inc (NYSE:IFF), worth close to $48.5 million, comprising 0.6% of its total 13F portfolio. Coming in second is Citadel Investment Group, led by Ken Griffin, holding a $26.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers that are bullish consist of Phill Gross and Robert Atchinson’s Adage Capital Management, Paul Marshall and Ian Wace’s Marshall Wace LLP and Tom Gayner’s Markel Gayner Asset Management. In terms of the portfolio weights assigned to each position Sandbar Asset Management allocated the biggest weight to International Flavors & Fragrances Inc (NYSE:IFF), around 5.7% of its 13F portfolio. Beech Hill Partners is also relatively very bullish on the stock, dishing out 1.95 percent of its 13F equity portfolio to IFF.

Judging by the fact that International Flavors & Fragrances Inc (NYSE:IFF) has faced declining sentiment from the aggregate hedge fund industry, we can see that there exists a select few money managers who sold off their full holdings in the first quarter. Intriguingly, Greg Poole’s Echo Street Capital Management dumped the biggest stake of the 750 funds followed by Insider Monkey, comprising an estimated $27 million in stock. Daniel Lascano’s fund, Lomas Capital Management, also cut its stock, about $8.6 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks similar to International Flavors & Fragrances Inc (NYSE:IFF). These stocks are Broadridge Financial Solutions, Inc. (NYSE:BR), Teledyne Technologies Incorporated (NYSE:TDY), Nucor Corporation (NYSE:NUE), and Baker Hughes Company (NYSE:BKR). This group of stocks’ market valuations match IFF’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.5 hedge funds with bullish positions and the average amount invested in these stocks was $267 million. That figure was $163 million in IFF’s case. Baker Hughes Company (NYSE:BKR) is the most popular stock in this table. On the other hand Teledyne Technologies Incorporated (NYSE:TDY) is the least popular one with only 21 bullish hedge fund positions. International Flavors & Fragrances Inc (NYSE:IFF) is not the most popular stock in this group but hedge fund interest is still above average. 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 still beat the market by 15.5 percentage points. Hedge funds were also right about betting on IFF, though not to the same extent, as the stock returned 20.7% during the second quarter and outperformed the market as well.

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