In this article you are going to find out whether hedge funds think IHS Markit Ltd. (NYSE:INFO) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is IHS Markit Ltd. (NYSE:INFO) a healthy stock for your portfolio? Hedge funds are in a bullish mood. The number of bullish hedge fund bets moved up by 15 lately. Our calculations also showed that INFO isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72% since March 2017 and outperformed the S&P 500 ETFs by more than 44 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Michael Lowenstein of Kensico Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this successful trader’s “corona catalyst plays“. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the 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 go over the fresh hedge fund action surrounding IHS Markit Ltd. (NYSE:INFO).
What have hedge funds been doing with IHS Markit Ltd. (NYSE:INFO)?
At Q1’s end, a total of 44 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 52% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards INFO over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
More specifically, Select Equity Group was the largest shareholder of IHS Markit Ltd. (NYSE:INFO), with a stake worth $385.9 million reported as of the end of September. Trailing Select Equity Group was Farallon Capital, which amassed a stake valued at $295.5 million. D E Shaw, Echo Street Capital Management, and Arrowstreet Capital 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 Nishkama Capital allocated the biggest weight to IHS Markit Ltd. (NASDAQ:INFO), around 16% of its 13F portfolio. Sunriver Management is also relatively very bullish on the stock, designating 7.02 percent of its 13F equity portfolio to INFO.
As industrywide interest jumped, key hedge funds were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the most valuable position in IHS Markit Ltd. (NYSE:INFO). Arrowstreet Capital had $41.9 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $35.1 million position during the quarter. The following funds were also among the new INFO investors: James Parsons’s Junto Capital Management, Michael Lowenstein’s Kensico Capital, and Mikal Patel’s Oribel Capital Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as IHS Markit Ltd. (NYSE:INFO) but similarly valued. We will take a look at eBay Inc (NASDAQ:EBAY), Telefonica S.A. (NYSE:TEF), The Kroger Co. (NYSE:KR), and Phillips 66 (NYSE:PSX). This group of stocks’ market caps are similar to INFO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EBAY | 52 | 3096036 | 1 |
| TEF | 7 | 16531 | -2 |
| KR | 43 | 1581591 | 12 |
| PSX | 43 | 420207 | -3 |
| Average | 36.25 | 1278591 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.25 hedge funds with bullish positions and the average amount invested in these stocks was $1279 million. That figure was $1159 million in INFO’s case. eBay Inc (NASDAQ:EBAY) is the most popular stock in this table. On the other hand Telefonica S.A. (NYSE:TEF) is the least popular one with only 7 bullish hedge fund positions. IHS Markit Ltd. (NYSE:INFO) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd but beat the market by 15.6 percentage points. Unfortunately INFO wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on INFO were disappointed as the stock returned 12% 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.
