We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 835 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2019. In this article we are going to take a look at smart money sentiment towards Invesco Ltd. (NYSE:IVZ).
Invesco Ltd. (NYSE:IVZ) has seen a decrease in enthusiasm from smart money in recent months. Our calculations also showed that IVZ 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).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings 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.
Noam Gottesman of GLG Partners
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 take a gander at the new hedge fund action encompassing Invesco Ltd. (NYSE:IVZ).
What does smart money think about Invesco Ltd. (NYSE:IVZ)?
At the end of the fourth quarter, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the previous quarter. The graph below displays the number of hedge funds with bullish position in IVZ over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Richard S. Pzena’s Pzena Investment Management has the number one position in Invesco Ltd. (NYSE:IVZ), worth close to $70.7 million, accounting for 0.3% of its total 13F portfolio. The second largest stake is held by Ken Griffin of Citadel Investment Group, with a $48.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish include Dmitry Balyasny’s Balyasny Asset Management, Israel Englander’s Millennium Management and Noam Gottesman’s GLG Partners. In terms of the portfolio weights assigned to each position Valueworks LLC allocated the biggest weight to Invesco Ltd. (NYSE:IVZ), around 3.53% of its 13F portfolio. Pzena Investment Management is also relatively very bullish on the stock, earmarking 0.33 percent of its 13F equity portfolio to IVZ.
Judging by the fact that Invesco Ltd. (NYSE:IVZ) has experienced declining sentiment from the aggregate hedge fund industry, logic holds that there was a specific group of hedgies that elected to cut their full holdings by the end of the third quarter. Intriguingly, Paul Tudor Jones’s Tudor Investment Corp cut the largest stake of all the hedgies followed by Insider Monkey, worth close to $1.6 million in stock, and Michael Gelband’s ExodusPoint Capital was right behind this move, as the fund said goodbye to about $0.9 million worth. These transactions are interesting, as total hedge fund interest fell by 2 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Invesco Ltd. (NYSE:IVZ) but similarly valued. These stocks are Pilgrim’s Pride Corporation (NASDAQ:PPC), Bunge Limited (NYSE:BG), Newell Brands Inc. (NYSE:NWL), and Brookfield Property Partners LP (NYSE:BPY). This group of stocks’ market valuations resemble IVZ’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PPC | 24 | 299579 | -2 |
| BG | 37 | 689916 | 0 |
| NWL | 31 | 1424124 | -1 |
| BPY | 8 | 63332 | 0 |
| Average | 25 | 619238 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $619 million. That figure was $253 million in IVZ’s case. Bunge Limited (NYSE:BG) is the most popular stock in this table. On the other hand Brookfield Property Partners LP (NYSE:BPY) is the least popular one with only 8 bullish hedge fund positions. Invesco Ltd. (NYSE:IVZ) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately IVZ wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); IVZ investors were disappointed as the stock returned -50.5% 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 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.
