Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published 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. At Insider Monkey, we pore over the filings of nearly 835 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of December 31. In this article, we will use that wealth of knowledge to determine whether or not ICICI Bank Limited (NYSE:IBN) makes for a good investment right now.
ICICI Bank Limited (NYSE:IBN) has experienced an increase in activity from the world’s largest hedge funds lately. Our calculations also showed that IBN 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.
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’ 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 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.
John Armitage of Egerton Capital
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 we’re going to take a peek at the fresh hedge fund action regarding ICICI Bank Limited (NYSE:IBN).
How have hedgies been trading ICICI Bank Limited (NYSE:IBN)?
Heading into the first quarter of 2020, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the third quarter of 2019. On the other hand, there were a total of 26 hedge funds with a bullish position in IBN a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in ICICI Bank Limited (NYSE:IBN) was held by Egerton Capital Limited, which reported holding $213.1 million worth of stock at the end of September. It was followed by Samlyn Capital with a $171.4 million position. Other investors bullish on the company included Driehaus Capital, LMR Partners, and Theleme Partners. In terms of the portfolio weights assigned to each position Dalton Investments allocated the biggest weight to ICICI Bank Limited (NYSE:IBN), around 20.66% of its 13F portfolio. Think Investments is also relatively very bullish on the stock, setting aside 16.85 percent of its 13F equity portfolio to IBN.
Now, specific money managers were breaking ground themselves. Egerton Capital Limited, managed by John Armitage, assembled the biggest position in ICICI Bank Limited (NYSE:IBN). Egerton Capital Limited had $213.1 million invested in the company at the end of the quarter. Nehal Chopra’s Ratan Capital Group also made a $3 million investment in the stock during the quarter. The other funds with brand new IBN positions are Matthew Tewksbury’s Stevens Capital Management, Donald Sussman’s Paloma Partners, and Paul Tudor Jones’s Tudor Investment Corp.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as ICICI Bank Limited (NYSE:IBN) but similarly valued. These stocks are Illumina, Inc. (NASDAQ:ILMN), EOG Resources Inc (NYSE:EOG), Edwards Lifesciences Corporation (NYSE:EW), and Humana Inc (NYSE:HUM). All of these stocks’ market caps resemble IBN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ILMN | 43 | 1121339 | 3 |
| EOG | 43 | 1486121 | -10 |
| EW | 45 | 1283127 | 9 |
| HUM | 75 | 4982047 | 10 |
| Average | 51.5 | 2218159 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 51.5 hedge funds with bullish positions and the average amount invested in these stocks was $2218 million. That figure was $1108 million in IBN’s case. Humana Inc (NYSE:HUM) is the most popular stock in this table. On the other hand Illumina, Inc. (NASDAQ:ILMN) is the least popular one with only 43 bullish hedge fund positions. Compared to these stocks ICICI Bank Limited (NYSE:IBN) is even less popular than ILMN. Hedge funds dodged a bullet by taking a bearish stance towards IBN. 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 11.7% in 2020 through March 11th but managed to beat the market by 3.1 percentage points. Unfortunately IBN wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); IBN investors were disappointed as the stock returned -20.5% 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.
Disclosure: None. This article was originally published at Insider Monkey.
