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 InterContinental Hotels Group PLC (NYSE:IHG) makes for a good investment right now.
InterContinental Hotels Group PLC (NYSE:IHG) has seen a decrease in hedge fund interest in recent months. IHG was in 6 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 7 hedge funds in our database with IHG holdings at the end of the previous quarter. Our calculations also showed that IHG 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.
In the 21st century investor’s toolkit there are a multitude of methods investors can use to appraise their holdings. Two of the less utilized methods are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the best picks of the best investment managers can outperform the broader indices by a very impressive amount (see the details here).
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. 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. With all of this in mind we’re going to analyze the latest hedge fund action encompassing InterContinental Hotels Group PLC (NYSE:IHG).
Hedge fund activity in InterContinental Hotels Group PLC (NYSE:IHG)
At the end of the fourth quarter, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards IHG over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in InterContinental Hotels Group PLC (NYSE:IHG), which was worth $9.7 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $7.7 million worth of shares. Balyasny Asset Management, Driehaus Capital, and D E Shaw 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 Driehaus Capital allocated the biggest weight to InterContinental Hotels Group PLC (NYSE:IHG), around 0.08% of its 13F portfolio. Balyasny Asset Management is also relatively very bullish on the stock, dishing out 0.02 percent of its 13F equity portfolio to IHG.
Because InterContinental Hotels Group PLC (NYSE:IHG) has experienced falling interest from hedge fund managers, it’s easy to see that there lies a certain “tier” of fund managers who were dropping their entire stakes heading into Q4. Intriguingly, Matthew Tewksbury’s Stevens Capital Management said goodbye to the largest stake of the “upper crust” of funds watched by Insider Monkey, valued at close to $0.4 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund dumped about $0 million worth. These transactions are important to note, as total hedge fund interest fell by 1 funds heading into Q4.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as InterContinental Hotels Group PLC (NYSE:IHG) but similarly valued. These stocks are Fidelity National Financial Inc (NYSE:FNF), Cenovus Energy Inc (NYSE:CVE), J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT), and Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH). This group of stocks’ market valuations are closest to IHG’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FNF | 36 | 357320 | 6 |
| CVE | 31 | 578518 | 3 |
| JBHT | 28 | 321794 | 2 |
| NCLH | 38 | 1090154 | 4 |
| Average | 33.25 | 586947 | 3.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.25 hedge funds with bullish positions and the average amount invested in these stocks was $587 million. That figure was $27 million in IHG’s case. Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH) is the most popular stock in this table. On the other hand J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) is the least popular one with only 28 bullish hedge fund positions. Compared to these stocks InterContinental Hotels Group PLC (NYSE:IHG) is even less popular than JBHT. Hedge funds dodged a bullet by taking a bearish stance towards IHG. 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 22.3% in 2020 through March 16th but managed to beat the market by 3.2 percentage points. Unfortunately IHG wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); IHG investors were disappointed as the stock returned -48.2% 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 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.
