Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors’ favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the third quarter. The stats were even worse in recent years when most of the advances in the market were due to large gains by FAANG stocks. However, one bright side for individual investors was the strong performance of hedge funds’ top consensus picks. This year hedge funds’ top 20 stock picks outperformed the S&P 500 Index by 9.9 percentage points through the end of November. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.
Is InterContinental Hotels Group PLC (NYSE:IHG) the right pick for your portfolio? The best stock pickers are betting on the stock. The number of long hedge fund bets inched up by 3 in recent months. Our calculations also showed that IHG isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Dmitry Balyasny of Balyasny Asset Managemnet
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind we’re going to check out the new hedge fund action surrounding InterContinental Hotels Group PLC (NYSE:IHG).
Hedge fund activity in InterContinental Hotels Group PLC (NYSE:IHG)
At Q3’s end, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 75% from one quarter earlier. On the other hand, there were a total of 3 hedge funds with a bullish position in IHG a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
The largest stake in InterContinental Hotels Group PLC (NYSE:IHG) was held by Renaissance Technologies, which reported holding $8.9 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $8.1 million position. Other investors bullish on the company included Balyasny Asset Management, D E Shaw, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Balyasny Asset Management allocated the biggest weight to InterContinental Hotels Group PLC (NYSE:IHG), around 0.04% of its 13F portfolio. Stevens Capital Management is also relatively very bullish on the stock, designating 0.03 percent of its 13F equity portfolio to IHG.
With a general bullishness amongst the heavyweights, key money managers have jumped into InterContinental Hotels Group PLC (NYSE:IHG) headfirst. Balyasny Asset Management, managed by Dmitry Balyasny, established the biggest position in InterContinental Hotels Group PLC (NYSE:IHG). Balyasny Asset Management had $6.2 million invested in the company at the end of the quarter. Matthew Tewksbury’s Stevens Capital Management also made a $0.4 million investment in the stock during the quarter. The only other fund with a new position in the stock is Paul Marshall and Ian Wace’s Marshall Wace.
Let’s now take a look at hedge fund activity in other stocks similar to InterContinental Hotels Group PLC (NYSE:IHG). These stocks are Western Midstream Partners, LP (NYSE:WES), Textron Inc. (NYSE:TXT), Jack Henry & Associates, Inc. (NASDAQ:JKHY), and Tiffany & Co. (NYSE:TIF). This group of stocks’ market values resemble IHG’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WES | 10 | 107648 | 1 |
| TXT | 23 | 658405 | 0 |
| JKHY | 18 | 181183 | 0 |
| TIF | 30 | 1500513 | 8 |
| Average | 20.25 | 611937 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $612 million. That figure was $30 million in IHG’s case. Tiffany & Co. (NYSE:TIF) is the most popular stock in this table. On the other hand Western Midstream Partners, LP (NYSE:WES) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks InterContinental Hotels Group PLC (NYSE:IHG) is even less popular than WES. Hedge funds dodged a bullet by taking a bearish stance towards IHG. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately IHG wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); IHG investors were disappointed as the stock returned 3.9% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
