Amid an overall market correction, many stocks that smart money investors were collectively bullish on tanked during the third quarter. Among them, Valeant and Micron ranked among the top 30 picks and both lost around 20%. Citigroup, which was the third most popular stock, lost 10% amid uncertainty regarding the interest rates. Nevertheless, our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Equifax Inc. (NYSE:EFX) has seen an increase in hedge fund interest lately. EFX was in 35 hedge funds’ portfolios at the end of September. There were 29 hedge funds in our database with EFX holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Tata Motors Limited (ADR) (NYSE:TTM), Tractor Supply Company (NASDAQ:TSCO), and Cheniere Energy, Inc. (NYSEAMEX:LNG) to gather more data points.
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With all of this in mind, let’s analyze the latest action encompassing Equifax Inc. (NYSE:EFX).
How are hedge funds trading Equifax Inc. (NYSE:EFX)?
At Q3’s end, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 21% from one quarter earlier. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, AQR Capital Management, managed by Cliff Asness, holds the number one position in Equifax Inc. (NYSE:EFX). AQR Capital Management has a $102.2 million position in the stock, comprising 0.2% of its 13F portfolio. Coming in second is Adage Capital Management, managed by Phill Gross and Robert Atchinson, which holds a $49.8 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions encompass Israel Englander’s Millennium Management, Jim Simons’ Renaissance Technologies and Ken Griffin’s Citadel Investment Group.
As one would reasonably expect, key money managers have jumped into Equifax Inc. (NYSE:EFX) headfirst. Echo Street Capital Management, managed by Greg Poole, created the most outsized position in Equifax Inc. (NYSE:EFX). Echo Street Capital Management had $28.2 million invested in the company at the end of the quarter. David Forster and Peter Wilton’s IBIS Capital Partners also made a $15.6 million investment in the stock during the quarter. The following funds were also among the new EFX investors: David Harding’s Winton Capital Management, Bruce Kovner’s Caxton Associates LP, and Ray Dalio’s Bridgewater Associates.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Equifax Inc. (NYSE:EFX) but similarly valued. These stocks are Tata Motors Limited (ADR) (NYSE:TTM), Tractor Supply Company (NASDAQ:TSCO), Cheniere Energy, Inc. (NYSEAMEX:LNG), and Agilent Technologies Inc. (NYSE:A). All of these stocks’ market caps resemble EFX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TTM | 22 | 431033 | 2 |
| TSCO | 30 | 237007 | 10 |
| LNG | 62 | 7122951 | -14 |
| A | 46 | 1268403 | -4 |
As you can see these stocks had an average of 40 hedge funds with bullish positions and the average amount invested in these stocks was $2265 million. That figure was $439 million in EFX’s case. Cheniere Energy, Inc. (NYSEAMEX:LNG) is the most popular stock in this table. On the other hand Tata Motors Limited (ADR) (NYSE:TTM) is the least popular one with only 22 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard LNG might be a better candidate to consider a long position.
