In this article you are going to find out whether hedge funds think Information Services Group, Inc. (NASDAQ:III) 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.
Information Services Group, Inc. (NASDAQ:III) investors should be aware of an increase in activity from the world’s largest hedge funds of late. III was in 7 hedge funds’ portfolios at the end of March. There were 6 hedge funds in our database with III holdings at the end of the previous quarter. Our calculations also showed that III 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.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Roger Ibbotson of Zebra Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. 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 we’re going to take a look at the new hedge fund action encompassing Information Services Group, Inc. (NASDAQ:III).
Hedge fund activity in Information Services Group, Inc. (NASDAQ:III)
At the end of the first quarter, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards III over the last 18 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
More specifically, Private Capital Management was the largest shareholder of Information Services Group, Inc. (NASDAQ:III), with a stake worth $15.5 million reported as of the end of September. Trailing Private Capital Management was Renaissance Technologies, which amassed a stake valued at $5.6 million. Zebra Capital Management, Arrowstreet Capital, and Millennium 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 Private Capital Management allocated the biggest weight to Information Services Group, Inc. (NASDAQ:III), around 4.87% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, earmarking 0.19 percent of its 13F equity portfolio to III.
As aggregate interest increased, specific money managers have jumped into Information Services Group, Inc. (NASDAQ:III) headfirst. Citadel Investment Group, managed by Ken Griffin, assembled the most valuable position in Information Services Group, Inc. (NASDAQ:III). Citadel Investment Group had $0.1 million invested in the company at the end of the quarter.
Let’s go over hedge fund activity in other stocks similar to Information Services Group, Inc. (NASDAQ:III). These stocks are Bel Fuse, Inc. (NASDAQ:BELFB), Avianca Holdings SA (NYSE:AVH), Bankwell Financial Group, Inc. (NASDAQ:BWFG), and Aytu BioScience, Inc. (NASDAQ:AYTU). This group of stocks’ market caps are closest to III’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BELFB | 7 | 11172 | 0 |
| AVH | 4 | 1570 | 1 |
| BWFG | 4 | 15637 | -1 |
| AYTU | 5 | 827 | 4 |
| Average | 5 | 7302 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 5 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $22 million in III’s case. Bel Fuse, Inc. (NASDAQ:BELFB) is the most popular stock in this table. On the other hand Avianca Holdings SA (NYSE:AVH) is the least popular one with only 4 bullish hedge fund positions. Information Services Group, Inc. (NASDAQ:III) 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 13.9% in 2020 through June 10th but beat the market by 14.2 percentage points. Unfortunately III wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on III were disappointed as the stock returned -22.2% 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.
