Looking for stocks with high upside potential? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 13.1% in the 2.5 months of 2019 (including dividend payments). Conversely, hedge funds’ 15 preferred S&P 500 stocks generated a return of 19.7% during the same period, with 93% of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like World Fuel Services Corporation (NYSE:INT).
World Fuel Services Corporation (NYSE:INT) investors should pay attention to an increase in hedge fund interest of late. Our calculations also showed that INT isn’t among the 30 most popular stocks among hedge funds.
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to take a gander at the new hedge fund action surrounding World Fuel Services Corporation (NYSE:INT).
Hedge fund activity in World Fuel Services Corporation (NYSE:INT)
At Q4’s end, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 85% from the previous quarter. On the other hand, there were a total of 18 hedge funds with a bullish position in INT a year ago. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
More specifically, AQR Capital Management was the largest shareholder of World Fuel Services Corporation (NYSE:INT), with a stake worth $18.7 million reported as of the end of December. Trailing AQR Capital Management was D E Shaw, which amassed a stake valued at $15.7 million. Encompass Capital Advisors, Citadel Investment Group, and Royce & Associates were also very fond of the stock, giving the stock large weights in their portfolios.
With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. Encompass Capital Advisors, managed by Todd J. Kantor, created the most outsized position in World Fuel Services Corporation (NYSE:INT). Encompass Capital Advisors had $8.1 million invested in the company at the end of the quarter. Jim Simons’s Renaissance Technologies also made a $3.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Peter Muller’s PDT Partners, Israel Englander’s Millennium Management, and Minhua Zhang’s Weld Capital Management.
Let’s also examine hedge fund activity in other stocks similar to World Fuel Services Corporation (NYSE:INT). We will take a look at WildHorse Resource Development Corporation (NYSE:WRD), Mueller Water Products, Inc. (NYSE:MWA), Meritor Inc (NYSE:MTOR), and Saia Inc (NASDAQ:SAIA). All of these stocks’ market caps match INT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WRD | 18 | 93384 | -2 |
| MWA | 24 | 200932 | 8 |
| MTOR | 20 | 290128 | -4 |
| SAIA | 18 | 48410 | 3 |
| Average | 20 | 158214 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $158 million. That figure was $73 million in INT’s case. Mueller Water Products, Inc. (NYSE:MWA) is the most popular stock in this table. On the other hand WildHorse Resource Development Corporation (NYSE:WRD) is the least popular one with only 18 bullish hedge fund positions. World Fuel Services Corporation (NYSE:INT) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on INT as the stock returned 47.9% and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
