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 (read our latest 10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter. One of these stocks was Equifax Inc. (NYSE:EFX).
Is Equifax Inc. (NYSE:EFX) a buy right now? Prominent investors are becoming hopeful. The number of long hedge fund positions inched up by 4 lately. Our calculations also showed that EFX isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). EFX was in 32 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 28 hedge funds in our database with EFX positions at the end of the previous quarter.
William Von Mueffling of Cantillon Capital Management
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. With all of this in mind let’s view the fresh hedge fund action encompassing Equifax Inc. (NYSE:EFX).
How have hedgies been trading Equifax Inc. (NYSE:EFX)?
At the end of the fourth quarter, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in EFX over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Lone Pine Capital was the largest shareholder of Equifax Inc. (NYSE:EFX), with a stake worth $483.2 million reported as of the end of September. Trailing Lone Pine Capital was Generation Investment Management, which amassed a stake valued at $335.4 million. Cantillon Capital Management, Farallon Capital, and Echo Street Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Harbor Spring Capital allocated the biggest weight to Equifax Inc. (NYSE:EFX), around 4.23% of its 13F portfolio. Cantillon Capital Management is also relatively very bullish on the stock, earmarking 2.99 percent of its 13F equity portfolio to EFX.
As industrywide interest jumped, key hedge funds have been driving this bullishness. Samlyn Capital, managed by Robert Pohly, initiated the most valuable position in Equifax Inc. (NYSE:EFX). Samlyn Capital had $62 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also initiated a $2.4 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 Harding’s Winton Capital Management, and Mikal Patel’s Oribel Capital Management.
Let’s now review hedge fund activity in other stocks similar to Equifax Inc. (NYSE:EFX). We will take a look at Check Point Software Technologies Ltd. (NASDAQ:CHKP), Magna International Inc. (NYSE:MGA), Dover Corporation (NYSE:DOV), and Conagra Brands, Inc. (NYSE:CAG). This group of stocks’ market caps resemble EFX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CHKP | 30 | 626708 | 6 |
| MGA | 23 | 688858 | 4 |
| DOV | 29 | 547165 | -6 |
| CAG | 29 | 740813 | -2 |
| Average | 27.75 | 650886 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.75 hedge funds with bullish positions and the average amount invested in these stocks was $651 million. That figure was $1615 million in EFX’s case. Check Point Software Technologies Ltd. (NASDAQ:CHKP) is the most popular stock in this table. On the other hand Magna International Inc. (NYSE:MGA) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks Equifax Inc. (NYSE:EFX) is more popular among hedge funds. 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 still managed to beat the market by 3.2 percentage points. Hedge funds were also right about betting on EFX as the stock returned -7.7% so far in Q1 (through March 16th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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.
