Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we publish an article with the title “Recession is Imminent: We Need A Travel Ban NOW”. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 835 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Intercontinental Exchange Inc (NYSE:ICE).
Is Intercontinental Exchange Inc (NYSE:ICE) going to take off soon? The best stock pickers are getting more optimistic. The number of long hedge fund positions improved by 3 recently. Our calculations also showed that ICE isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Harold Levy of Iridian Asset Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. With all of this in mind let’s take a glance at the recent hedge fund action regarding Intercontinental Exchange Inc (NYSE:ICE).
What does smart money think about Intercontinental Exchange Inc (NYSE:ICE)?
Heading into the first quarter of 2020, a total of 52 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the previous quarter. On the other hand, there were a total of 41 hedge funds with a bullish position in ICE a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Cantillon Capital Management was the largest shareholder of Intercontinental Exchange Inc (NYSE:ICE), with a stake worth $410.8 million reported as of the end of September. Trailing Cantillon Capital Management was GQG Partners, which amassed a stake valued at $369.6 million. D E Shaw, Alkeon Capital Management, and Iridian Asset 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 Truvvo Partners allocated the biggest weight to Intercontinental Exchange Inc (NYSE:ICE), around 18.28% of its 13F portfolio. Crescent Park Management is also relatively very bullish on the stock, dishing out 5.15 percent of its 13F equity portfolio to ICE.
Now, key hedge funds have been driving this bullishness. Interval Partners, managed by Gregg Moskowitz, created the biggest position in Intercontinental Exchange Inc (NYSE:ICE). Interval Partners had $4.8 million invested in the company at the end of the quarter. Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors also made a $4.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Tudor Jones’s Tudor Investment Corp, Ian Simm’s Impax Asset Management, and Philippe Laffont’s Coatue Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Intercontinental Exchange Inc (NYSE:ICE) but similarly valued. These stocks are JD.Com Inc (NASDAQ:JD), ABB Ltd (NYSE:ABB), General Dynamics Corporation (NYSE:GD), and Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG). This group of stocks’ market values resemble ICE’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| JD | 63 | 6041314 | 3 |
| ABB | 10 | 372334 | -3 |
| GD | 46 | 6699253 | 4 |
| SMFG | 11 | 584035 | 0 |
| Average | 32.5 | 3424234 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.5 hedge funds with bullish positions and the average amount invested in these stocks was $3424 million. That figure was $2713 million in ICE’s case. JD.Com Inc (NASDAQ:JD) is the most popular stock in this table. On the other hand ABB Ltd (NYSE:ABB) is the least popular one with only 10 bullish hedge fund positions. Intercontinental Exchange Inc (NYSE:ICE) is not the most popular stock in this group but hedge fund interest is still above average. 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 12.9% in 2020 through March 9th but still beat the market by 1.9 percentage points. Hedge funds were also right about betting on ICE as the stock returned -4.2% during the first quarter (through March 9th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
