Investing in hedge funds can bring large profits, but it’s not for everybody since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ complex research processes to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we pay special attention to the hedge fund activity in the small-cap space. Nevertheless, it is also possible to find underpriced large-cap stocks by following the hedge funds’ moves. In this article, we look at what those funds think of IQVIA Holdings, Inc. (NYSE:IQV) based on that data.
IQVIA Holdings, Inc. (NYSE:IQV) was in 64 hedge funds’ portfolios at the end of September. IQV has experienced a decrease in enthusiasm from smart money lately. There were 67 hedge funds in our database with IQV positions at the end of the previous quarter. Our calculations also showed that IQV isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
Andrew Sandler of Sandler Capital Management
We leave no stone unturned when looking for the next great investment idea. For example, Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now we’re going to take a peek at the recent hedge fund action regarding IQVIA Holdings, Inc. (NYSE:IQV).
What have hedge funds been doing with IQVIA Holdings, Inc. (NYSE:IQV)?
Heading into the fourth quarter of 2019, a total of 64 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards IQV over the last 17 quarters. With the smart money’s capital changing hands, there exist a few key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Larry Robbins’s Glenview Capital has the number one position in IQVIA Holdings, Inc. (NYSE:IQV), worth close to $540.4 million, comprising 5.7% of its total 13F portfolio. Sitting at the No. 2 spot is Lone Pine Capital, previously led by Stephen Mandel, holding a $530.2 million position; the fund has 3.1% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish include Thomas Steyer (founder)’s Farallon Capital, David E. Shaw’s D E Shaw, and Dan Loeb’s Third Point. In terms of the portfolio weights assigned to each position, Brahman Capital allocated the biggest weight to IQVIA Holdings, Inc. (NYSE:IQV), around 11.71% of its 13F portfolio. Copernicus Capital Management is also relatively very bullish on the stock, earmarking 8.06 percent of its 13F equity portfolio to IQV.
Seeing as IQVIA Holdings, Inc. (NYSE:IQV) has witnessed declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of hedgies that slashed their positions entirely heading into Q4. It’s worth mentioning that John Lykouretzos’s Hoplite Capital Management dropped the biggest stake of all the hedgies tracked by Insider Monkey, comprising an estimated $38.2 million in stock. Brandon Haley’s fund, Holocene Advisors, also cut its stock, about $18.3 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 3 funds heading into Q4.
Let’s go over hedge fund activity in other stocks similar to IQVIA Holdings, Inc. (NYSE:IQV). These stocks are Williams Companies, Inc. (NYSE:WMB), Southwest Airlines Co. (NYSE:LUV), Electronic Arts Inc. (NASDAQ:EA), and Amphenol Corporation (NYSE:APH). All of these stocks’ market caps match IQV’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WMB | 36 | 643068 | 2 |
| LUV | 36 | 3854849 | 3 |
| EA | 64 | 2089888 | 5 |
| APH | 31 | 758511 | 6 |
| Average | 41.75 | 1836579 | 4 |
View the table here if you experience formatting issues.
As you can see these stocks had an average of 41.75 hedge funds with bullish positions and the average amount invested in these stocks was $1837 million. That figure was $4469 million in IQV’s case. Electronic Arts Inc. (NASDAQ:EA) is the most popular stock in this table. On the other hand, Amphenol Corporation (NYSE:APH) is the least popular one with only 31 bullish hedge fund positions. IQVIA Holdings, Inc. (NYSE:IQV) 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 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on IQV, though not to the same extent, as the stock returned 33.3% during 2019 (as of 12/23) and outperformed the market as well.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
