Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients’ money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth also depends on it. Regardless of the various methods used by elite investors like David Tepper and David Abrams, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space. Nevertheless, it is also possible to identify cheap large cap stocks by following the footsteps of best performing hedge funds. In this article we are going to take a look at smart money sentiment towards Intuit Inc. (NASDAQ:INTU).
Intuit Inc. (NASDAQ:INTU) has experienced an increase in hedge fund interest in recent months. Our calculations also showed that INTU isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 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 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
Cliff Asness of AQR Capital Management
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. Now we’re going to take a look at the new hedge fund action surrounding Intuit Inc. (NASDAQ:INTU).
What does smart money think about Intuit Inc. (NASDAQ:INTU)?
At the end of the third quarter, a total of 47 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 2% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards INTU over the last 17 quarters. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the biggest position in Intuit Inc. (NASDAQ:INTU). AQR Capital Management has a $542.4 million position in the stock, comprising 0.6% of its 13F portfolio. Coming in second is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $410.9 million position; 1% of its 13F portfolio is allocated to the stock. Some other professional money managers with similar optimism include John Overdeck and David Siegel’s Two Sigma Advisors, Philippe Laffont’s Coatue Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Valley Forge Capital allocated the biggest weight to Intuit Inc. (NASDAQ:INTU), around 5.62% of its 13F portfolio. Junto Capital Management is also relatively very bullish on the stock, dishing out 2.36 percent of its 13F equity portfolio to INTU.
Now, key money managers have jumped into Intuit Inc. (NASDAQ:INTU) headfirst. Junto Capital Management, managed by James Parsons, established the most valuable position in Intuit Inc. (NASDAQ:INTU). Junto Capital Management had $39.7 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $21.3 million position during the quarter. The other funds with brand new INTU positions are Brian Ashford-Russell and Tim Woolley’s Polar Capital, Tor Minesuk’s Mondrian Capital, and Perella Weinberg Partners.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Intuit Inc. (NASDAQ:INTU) but similarly valued. These stocks are Westpac Banking Corporation (NYSE:WBK), Becton, Dickinson and Company (NYSE:BDX), The TJX Companies, Inc. (NYSE:TJX), and T-Mobile US, Inc. (NYSE:TMUS). This group of stocks’ market values resemble INTU’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WBK | 4 | 42624 | 1 |
| BDX | 44 | 1159555 | 4 |
| TJX | 48 | 1965386 | -2 |
| TMUS | 60 | 1457333 | -18 |
| Average | 39 | 1156225 | -3.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 39 hedge funds with bullish positions and the average amount invested in these stocks was $1156 million. That figure was $2011 million in INTU’s case. T-Mobile US, Inc. (NYSE:TMUS) is the most popular stock in this table. On the other hand Westpac Banking Corporation (NYSE:WBK) is the least popular one with only 4 bullish hedge fund positions. Intuit Inc. (NASDAQ:INTU) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on INTU, though not to the same extent, as the stock returned 36.3% during 2019 (as of 12/23) and outperformed the market as well.
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.
