Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying for a while now that the current market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the fourth quarter, many investors lost money due to unpredictable events such as the sudden increase in long-term interest rates and unintended consequences of the trade war with China. Nevertheless, many of the stocks that tanked in the third quarter still sport strong fundamentals and their decline was more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Inter Parfums, Inc. (NASDAQ:IPAR) changed recently.
Hedge fund interest in Inter Parfums, Inc. (NASDAQ:IPAR) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare IPAR to other stocks including Banner Corporation (NASDAQ:BANR), Pacira Pharmaceuticals Inc (NASDAQ:PCRX), and At Home Group Inc. (NYSE:HOME) to get a better sense of its popularity.
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 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 market by 18 percentage points since May 2014 through December 3, 2018 (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.
We’re going to check out the fresh hedge fund action surrounding Inter Parfums, Inc. (NASDAQ:IPAR).
What does the smart money think about Inter Parfums, Inc. (NASDAQ:IPAR)?
At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, no change from the previous quarter. Below, you can check out the change in hedge fund sentiment towards IPAR over the last 13 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Chuck Royce’s Royce & Associates has the most valuable position in Inter Parfums, Inc. (NASDAQ:IPAR), worth close to $24.8 million, comprising 0.2% of its total 13F portfolio. On Royce & Associates’s heels is Columbus Circle Investors, led by Principal Global Investors, holding a $14.8 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Other peers with similar optimism contain Murray Stahl’s Horizon Asset Management, Jim Simons’s Renaissance Technologies and Peter Muller’s PDT Partners.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Balyasny Asset Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Marshall Wace LLP).
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Inter Parfums, Inc. (NASDAQ:IPAR) but similarly valued. These stocks are Banner Corporation (NASDAQ:BANR), Pacira Pharmaceuticals Inc (NASDAQ:PCRX), At Home Group Inc. (NYSE:HOME), and Azul S.A. (NYSE:AZUL). All of these stocks’ market caps match IPAR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BANR | 20 | 109128 | 5 |
| PCRX | 25 | 689388 | 4 |
| HOME | 22 | 221719 | 1 |
| AZUL | 11 | 89027 | -10 |
| Average | 19.5 | 277316 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $277 million. That figure was $65 million in IPAR’s case. Pacira Pharmaceuticals Inc (NASDAQ:PCRX) is the most popular stock in this table. On the other hand Azul S.A. (NYSE:AZUL) is the least popular one with only 11 bullish hedge fund positions. Inter Parfums, Inc. (NASDAQ:IPAR) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard PCRX might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
