At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards S&P Global Inc. (NYSE:SPGI).
S&P Global Inc. (NYSE:SPGI) was in 73 hedge funds’ portfolios at the end of the first quarter of 2020. SPGI investors should be aware of a decrease in hedge fund sentiment recently. There were 76 hedge funds in our database with SPGI holdings at the end of the previous quarter. Our calculations also showed that SPGI 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 dozens of indicators market participants use to grade their stock investments. A couple of the best indicators are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the best investment managers can beat their index-focused peers by a superb amount (see the details here).
William Von Mueffling of Cantillon Capital Management
At Insider Monkey 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 believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we asked astrophysicist Neil deGrasse Tyson about Tesla, Elon Musk, and his top stock picks. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a glance at the key hedge fund action surrounding S&P Global Inc. (NYSE:SPGI).
How are hedge funds trading S&P Global Inc. (NYSE:SPGI)?
At the end of the first quarter, a total of 73 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SPGI over the last 18 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
Among these funds, Cantillon Capital Management held the most valuable stake in S&P Global Inc. (NYSE:SPGI), which was worth $640.2 million at the end of the third quarter. On the second spot was Third Point which amassed $189.9 million worth of shares. Two Sigma Advisors, Iridian Asset Management, and Egerton Capital Limited 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 Rings Capital Management allocated the biggest weight to S&P Global Inc. (NYSE:SPGI), around 45.76% of its 13F portfolio. Valley Forge Capital is also relatively very bullish on the stock, setting aside 22.73 percent of its 13F equity portfolio to SPGI.
Seeing as S&P Global Inc. (NYSE:SPGI) has experienced a decline in interest from hedge fund managers, we can see that there were a few money managers who sold off their positions entirely by the end of the third quarter. Interestingly, William B. Gray’s Orbis Investment Management dropped the largest position of all the hedgies followed by Insider Monkey, worth close to $340.6 million in stock, and Farallon Capital was right behind this move, as the fund said goodbye to about $174.9 million worth. These moves are interesting, as total hedge fund interest fell by 3 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks similar to S&P Global Inc. (NYSE:SPGI). These stocks are Prologis Inc (NYSE:PLD), Duke Energy Corporation (NYSE:DUK), JD.Com Inc (NASDAQ:JD), and Automatic Data Processing (NASDAQ:ADP). This group of stocks’ market valuations are closest to SPGI’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PLD | 40 | 450612 | 5 |
| DUK | 35 | 1573551 | -2 |
| JD | 90 | 7919916 | 27 |
| ADP | 46 | 1444924 | -5 |
| Average | 52.75 | 2847251 | 6.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 52.75 hedge funds with bullish positions and the average amount invested in these stocks was $2847 million. That figure was $2586 million in SPGI’s case. JD.Com Inc (NASDAQ:JD) is the most popular stock in this table. On the other hand Duke Energy Corporation (NYSE:DUK) is the least popular one with only 35 bullish hedge fund positions. S&P Global Inc. (NYSE:SPGI) is not the most popular stock in this group but hedge fund interest is still above average. 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 still beat the market by 15.6 percentage points. Hedge funds were also right about betting on SPGI as the stock returned 27.3% in Q2 (through May 22nd) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
