Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Is Inter Parfums, Inc. (NASDAQ:IPAR) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Inter Parfums, Inc. (NASDAQ:IPAR) shareholders have witnessed an increase in hedge fund interest lately. IPAR was in 15 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 14 hedge funds in our database with IPAR positions at the end of the previous quarter. Our calculations also showed that IPAR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Richard Driehaus of Driehaus Capital
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to analyze the fresh hedge fund action surrounding Inter Parfums, Inc. (NASDAQ:IPAR).
What have hedge funds been doing with Inter Parfums, Inc. (NASDAQ:IPAR)?
At the end of the fourth quarter, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from one quarter earlier. By comparison, 11 hedge funds held shares or bullish call options in IPAR a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Royce & Associates, managed by Chuck Royce, holds the largest position in Inter Parfums, Inc. (NASDAQ:IPAR). Royce & Associates has a $25.4 million position in the stock, comprising 0.2% of its 13F portfolio. The second largest stake is held by Horizon Asset Management, managed by Murray Stahl, which holds a $14.5 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Other peers that hold long positions include Cliff Asness’s AQR Capital Management, Israel Englander’s Millennium Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Zebra Capital Management allocated the biggest weight to Inter Parfums, Inc. (NASDAQ:IPAR), around 0.67% of its 13F portfolio. Horizon Asset Management is also relatively very bullish on the stock, designating 0.41 percent of its 13F equity portfolio to IPAR.
As industrywide interest jumped, some big names have jumped into Inter Parfums, Inc. (NASDAQ:IPAR) headfirst. Driehaus Capital, managed by Richard Driehaus, initiated the biggest position in Inter Parfums, Inc. (NASDAQ:IPAR). Driehaus Capital had $2.4 million invested in the company at the end of the quarter. Minhua Zhang’s Weld Capital Management also made a $0.9 million investment in the stock during the quarter. The other funds with brand new IPAR positions are Mika Toikka’s AlphaCrest Capital Management, Donald Sussman’s Paloma Partners, and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Inter Parfums, Inc. (NASDAQ:IPAR) but similarly valued. We will take a look at Kosmos Energy Ltd (NYSE:KOS), Scorpio Tankers Inc. (NYSE:STNG), John Wiley & Sons Inc (NYSE:JW), and Seritage Growth Properties (NYSE:SRG). All of these stocks’ market caps resemble IPAR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KOS | 30 | 133090 | 5 |
| STNG | 33 | 233788 | 8 |
| JW | 21 | 81448 | 1 |
| SRG | 15 | 353030 | 1 |
| Average | 24.75 | 200339 | 3.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.75 hedge funds with bullish positions and the average amount invested in these stocks was $200 million. That figure was $67 million in IPAR’s case. Scorpio Tankers Inc. (NYSE:STNG) is the most popular stock in this table. On the other hand Seritage Growth Properties (NYSE:SRG) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Inter Parfums, Inc. (NASDAQ:IPAR) is even less popular than SRG. Hedge funds dodged a bullet by taking a bearish stance towards IPAR. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but managed to beat the market by 5.5 percentage points. Unfortunately IPAR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); IPAR investors were disappointed as the stock returned -37.3% 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 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
