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. 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. 0
IDEX Corporation (NYSE:IEX) was in 23 hedge funds’ portfolios at the end of December. IEX shareholders have witnessed an increase in hedge fund sentiment in recent months. There were 21 hedge funds in our database with IEX holdings at the end of the previous quarter. Our calculations also showed that IEX isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Ray Dalio of Bridgewater Associates
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 take a look at the fresh hedge fund action surrounding IDEX Corporation (NYSE:IEX).
What have hedge funds been doing with IDEX Corporation (NYSE:IEX)?
At Q4’s end, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in IEX 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.
Of the funds tracked by Insider Monkey, Ian Simm’s Impax Asset Management has the most valuable position in IDEX Corporation (NYSE:IEX), worth close to $262.1 million, accounting for 2.9% of its total 13F portfolio. The second most bullish fund manager is GAMCO Investors, managed by Mario Gabelli, which holds a $61.2 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Some other peers that hold long positions consist of Israel Englander’s Millennium Management, Renaissance Technologies and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position Impax Asset Management allocated the biggest weight to IDEX Corporation (NYSE:IEX), around 2.92% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, earmarking 0.49 percent of its 13F equity portfolio to IEX.
Consequently, key money managers have jumped into IDEX Corporation (NYSE:IEX) headfirst. Point72 Asset Management, managed by Steve Cohen, initiated the biggest position in IDEX Corporation (NYSE:IEX). Point72 Asset Management had $10.7 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also initiated a $2.5 million position during the quarter. The following funds were also among the new IEX investors: Ray Dalio’s Bridgewater Associates, David Andre and Astro Teller’s Cerebellum Capital, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.
Let’s also examine hedge fund activity in other stocks similar to IDEX Corporation (NYSE:IEX). We will take a look at SVB Financial Group (NASDAQ:SIVB), Franklin Resources, Inc. (NYSE:BEN), FMC Corporation (NYSE:FMC), and Steris Plc (NYSE:STE). This group of stocks’ market caps resemble IEX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SIVB | 35 | 740028 | -7 |
| BEN | 37 | 565331 | 0 |
| FMC | 35 | 571116 | -4 |
| STE | 33 | 699152 | 0 |
| Average | 35 | 643907 | -2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 35 hedge funds with bullish positions and the average amount invested in these stocks was $644 million. That figure was $488 million in IEX’s case. Franklin Resources, Inc. (NYSE:BEN) is the most popular stock in this table. On the other hand Steris Plc (NYSE:STE) is the least popular one with only 33 bullish hedge fund positions. Compared to these stocks IDEX Corporation (NYSE:IEX) is even less popular than STE. Hedge funds dodged a bullet by taking a bearish stance towards IEX. Our calculations showed that the top 20 most popular hedge fund stocks 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 managed to beat the market by 3.2 percentage points. Unfortunately IEX wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); IEX investors were disappointed as the stock returned -32.5% 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 so far 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.
