Is EFX Stock A Buy or Sell?

In this article you are going to find out whether hedge funds think Equifax Inc. (NYSE:EFX) 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.

Is EFX stock a buy? The smart money was becoming less confident. The number of long hedge fund positions retreated by 6 in recent months. Equifax Inc. (NYSE:EFX) was in 36 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 42. Our calculations also showed that EFX isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Andrew Sandler of Sandler Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s view the key hedge fund action regarding Equifax Inc. (NYSE:EFX).

Do Hedge Funds Think EFX Is A Good Stock To Buy Now?

At the end of December, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the third quarter of 2020. By comparison, 32 hedge funds held shares or bullish call options in EFX a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, David Blood and Al Gore’s Generation Investment Management has the number one position in Equifax Inc. (NYSE:EFX), worth close to $1.0914 billion, amounting to 4.9% of its total 13F portfolio. The second most bullish fund manager is Cantillon Capital Management, managed by William von Mueffling, which holds a $440 million position; the fund has 3.3% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions consist of Greg Poole’s Echo Street Capital Management, Terry Smith’s Fundsmith LLP and Farallon Capital. In terms of the portfolio weights assigned to each position Fosse Capital Partners allocated the biggest weight to Equifax Inc. (NYSE:EFX), around 18.89% of its 13F portfolio. Harbor Spring Capital is also relatively very bullish on the stock, designating 5.06 percent of its 13F equity portfolio to EFX.

Due to the fact that Equifax Inc. (NYSE:EFX) has witnessed falling interest from the smart money, it’s easy to see that there exists a select few hedgies that slashed their entire stakes last quarter. Intriguingly, James Parsons’s Junto Capital Management cut the biggest position of the “upper crust” of funds tracked by Insider Monkey, valued at about $60.6 million in stock, and Doug Silverman and Alexander Klabin’s Senator Investment Group was right behind this move, as the fund dropped about $58.8 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 6 funds last quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Equifax Inc. (NYSE:EFX) but similarly valued. We will take a look at Cloudflare, Inc. (NYSE:NET), PT Telekomunikasi Indonesia (NYSE:TLK), Lennar Corporation (NYSE:LEN), Valero Energy Corporation (NYSE:VLO), KKR & Co Inc. (NYSE:KKR), ViacomCBS Inc. (NASDAQ:VIAC), and Ameriprise Financial, Inc. (NYSE:AMP). This group of stocks’ market values are closest to EFX’s market value.

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As you can see these stocks had an average of 40.9 hedge funds with bullish positions and the average amount invested in these stocks was $1285 million. That figure was $2263 million in EFX’s case. Cloudflare, Inc. (NYSE:NET) is the most popular stock in this table. On the other hand PT Telekomunikasi Indonesia (NYSE:TLK) is the least popular one with only 4 bullish hedge fund positions. Equifax Inc. (NYSE:EFX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for EFX is 53.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7.9% in 2021 through April 1st and surpassed the market again by 0.4 percentage points. Unfortunately EFX wasn’t nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); EFX investors were disappointed as the stock returned -5.1% since the end of December (through 4/1) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

Disclosure: None. This article was originally published at Insider Monkey.

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