It’s a little-known fact that stock performance is not evenly distributed (i.e. you don’t have a 50/50 chance of picking a market-beating stock). In fact, despite the S&P 500 gaining about 5.2% between November 1, 2014 and October 30, 2015, less than 49% of the stocks in the index beat the market during that time. In contrast, the 30 stocks from the index which were the most popular among the investors that we track returned 9.5% during that time and 63% of them beat the market. This shows that while hedge funds get a lot of flak from the mainstream media for their performance, it can be rewarding to follow their moves using the right sets of data. Even then, there is never a fool proof strategy to generating returns, as even the collective wisdom of top hedge funds gets it wrong some times, as in the case of some of their top picks from the index like Micron and Anadarko. The data though, shows that following the collective wisdom of select hedge funds can be a very wise move overall.
Is iShares MSCI ACWI Index Fund (NASDAQ:ACWI) a first-rate stock to buy now? Investors who are in the know are getting less bullish. The number of bullish hedge fund bets were cut by 3 lately. It is important to note that the stock of iShares MSCI ACWI Index Fund (NASDAQ:ACWI) lost 9.27% value during the third quarter. However, the drop in stock value doesn’t reveal the real reasons behind a passive hedge fund sentiment, so we are going to find out more about hedge funds that held positions in iShares MSCI ACWI Index Fund (NASDAQ:ACWI), at the end of September.
The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Regency Centers Corp (NYSE:REG), Columbia Pipeline Group Inc (NYSE:CPGX), and Lamar Advertising Co (NASDAQ:LAMR) to gather more data points.
In the eyes of most shareholders, hedge funds are assumed to be worthless, old financial vehicles of the past. While there are more than 8000 funds in operation today, We look at the upper echelon of this group, approximately 700 funds. Most estimates calculate that this group of people handles most of the smart money’s total asset base, and by following their unrivaled investments, Insider Monkey has found numerous investment strategies that have historically beaten the broader indices. Insider Monkey’s small-cap hedge fund strategy beat the S&P 500 index by 12 percentage points per annum for a decade in their back tests.
Keeping this in mind, we’re going to take a glance at the new action regarding iShares MSCI ACWI Index Fund (NASDAQ:ACWI).
How have hedgies been trading iShares MSCI ACWI Index Fund (NASDAQ:ACWI)?
At the end of the third quarter, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a decline of 38% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Jim Chanos’ Kynikos has the largest position in iShares MSCI ACWI Index Fund (NASDAQ:ACWI), worth close to $15.6 million, accounting for 6.3% of its total 13F portfolio. The second most bullish fund manager is Citadel Investment Group, managed by Ken Griffin, which holds a $9.2 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors with similar optimism consist of Lee Munder’s Lee Munder Capital Group, and Mark Wolfson and Jamie Alexander’s Jasper Ridge Partners.
Seeing as iShares MSCI ACWI Index Fund (NASDAQ:ACWI) has faced a declination in interest from the aggregate hedge fund industry, we can see that there exists a select few money managers that decided to sell off their entire stakes last quarter. It’s worth mentioning that Louis Bacon’s Moore Global Investments dropped the largest stake of the 700 funds tracked by Insider Monkey, totaling close to $3 million in stock. Louis Navellier’s fund, Navellier & Associates, also said goodbye to its stock, about $0.5 million worth of shares. These transactions are important to note, as total hedge fund interest fell by 3 funds last quarter.
Let’s also examine hedge fund activity in other stocks similar to iShares MSCI ACWI Index Fund (NASDAQ:ACWI). These stocks are Regency Centers Corp (NYSE:REG), Columbia Pipeline Group Inc (NYSE:CPGX), Lamar Advertising Co (NASDAQ:LAMR), and A. O. Smith Corporation (NYSE:AOS). This group of stocks’ market valuations resemble iShares MSCI ACWI Index Fund (NASDAQ:ACWI)’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| REG | 7 | 54750 | -2 |
| CPGX | 25 | 354545 | 22 |
| LAMR | 26 | 463611 | -5 |
| AOS | 31 | 368076 | 5 |
As you can see, these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $310 million. That figure was $83 million in iShares MSCI ACWI Index Fund (NASDAQ:ACWI)’s case. A. O. Smith Corporation (NYSE:AOS) is the most popular stock in this table. On the other hand, Regency Centers Corp (NYSE:REG) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks, iShares MSCI ACWI Index Fund (NASDAQ:ACWI) is even less popular than Regency Centers Corp (NYSE:REG). 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. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case, more research is warranted.