Hedge Funds Are Beginning to Cast Their Bullish Gaze on Inter Parfums, Inc. (IPAR)

Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Inter Parfums, Inc. (NASDAQ:IPAR).

Inter Parfums, Inc. (NASDAQ:IPAR) investors should be aware of an increase in support from the world’s most successful money managers of late. IPAR was in 11 hedge funds’ portfolios at the end of September. There were 7 hedge funds in our database with IPAR positions at the end of the second quarter. At the end of this article we will also compare IPAR to other stocks including Green Plains Renewable Energy Inc. (NASDAQ:GPRE), Xencor Inc (NASDAQ:XNCR), and Greenbrier Companies Inc (NYSE:GBX) to get a better sense of its popularity.

We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.

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What does the smart money think about Inter Parfums, Inc. (NASDAQ:IPAR)?

Heading into the fourth quarter of 2016, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 57% jump from the second quarter of 2016. Below, you can check out the change in hedge fund sentiment towards IPAR over the last 5 quarters, which has more than doubled in the past two. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Royce & Associates, led by Chuck Royce, holds the largest position in Inter Parfums, Inc. (NASDAQ:IPAR). Royce & Associates has a $17.1 million position in the stock. The second largest stake is held by Renaissance Technologies, one of the largest hedge funds in the world, holding an $8.3 million position. Some other hedge funds and institutional investors that hold long positions consist of Columbus Circle Investors, Murray Stahl’s Horizon Asset Management, and Israel Englander’s Millennium Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

With general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. Columbus Circle Investors created the largest position in Inter Parfums, Inc. (NASDAQ:IPAR). Columbus Circle Investors had $7.5 million invested in the company at the end of the quarter. Cliff Asness’ AQR Capital Management also initiated a $0.3 million position during the quarter. The other funds with new positions in the stock are John Overdeck and David Siegel’s Two Sigma Advisors, David E. Shaw’s D E Shaw, and Paul Tudor Jones’ Tudor Investment Corp.

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. These stocks are Green Plains Renewable Energy Inc. (NASDAQ:GPRE), Xencor Inc (NASDAQ:XNCR), Greenbrier Companies Inc (NYSE:GBX), and MakeMyTrip Limited (NASDAQ:MMYT). All of these stocks’ market caps are similar to IPAR’s market cap.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $162 million. That figure was $46 million in IPAR’s case. Green Plains Renewable Energy Inc. (NASDAQ:GPRE) is the most popular stock in this table. On the other hand MakeMyTrip Limited (NASDAQ:MMYT) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Inter Parfums, Inc. (NASDAQ:IPAR) is even less popular than MMYT. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news, especially as hedge fund sentiment is rapidly improving. Nonetheless, we’d like to see more top investors get behind the stock before we consider making a move on it.

Disclosure: None