Is IAC/InterActiveCorp (IAC) A Good Stock To Buy?

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in IAC/InterActiveCorp (NASDAQ:IAC)? The smart money sentiment can provide an answer to this question.

Is IAC a good stock to buy? IAC/InterActiveCorp (NASDAQ:IAC) has seen a decrease in hedge fund interest lately. IAC/InterActiveCorp (NASDAQ:IAC) was in 63 hedge funds’ portfolios at the end of March. The all time high for this statistic is 72. There were 67 hedge funds in our database with IAC positions at the end of the fourth quarter. Our calculations also showed that IAC isn’t among the 30 most popular stocks among hedge funds (click for Q1 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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Gabriel Plotkin of Melvin Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let’s go over the new hedge fund action regarding IAC/InterActiveCorp (NASDAQ:IAC).

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

At first quarter’s end, a total of 63 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from one quarter earlier. By comparison, 57 hedge funds held shares or bullish call options in IAC a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

The largest stake in IAC/InterActiveCorp (NASDAQ:IAC) was held by Melvin Capital Management, which reported holding $328.8 million worth of stock at the end of December. It was followed by ShawSpring Partners with a $293.8 million position. Other investors bullish on the company included Echo Street Capital Management, Scopus Asset Management, and Scopus Asset Management. In terms of the portfolio weights assigned to each position ShawSpring Partners allocated the biggest weight to IAC/InterActiveCorp (NASDAQ:IAC), around 36.63% of its 13F portfolio. Harspring Capital Management is also relatively very bullish on the stock, dishing out 12.95 percent of its 13F equity portfolio to IAC.

Since IAC/InterActiveCorp (NASDAQ:IAC) has faced bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of hedge funds that decided to sell off their entire stakes last quarter. Interestingly, Christian Leone’s Luxor Capital Group dropped the biggest investment of the 750 funds monitored by Insider Monkey, valued at close to $286.9 million in stock, and Keith Meister’s Corvex Capital was right behind this move, as the fund said goodbye to about $69.1 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 4 funds last quarter.

Let’s check out hedge fund activity in other stocks similar to IAC/InterActiveCorp (NASDAQ:IAC). We will take a look at KeyCorp (NYSE:KEY), Hologic, Inc. (NASDAQ:HOLX), ZoomInfo Technologies Inc. (NASDAQ:ZI), Halliburton Company (NYSE:HAL), DISH Network Corp. (NASDAQ:DISH), Xylem Inc (NYSE:XYL), and StoneCo Ltd. (NASDAQ:STNE). This group of stocks’ market values match IAC’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 34 hedge funds with bullish positions and the average amount invested in these stocks was $1090 million. That figure was $2102 million in IAC’s case. DISH Network Corp. (NASDAQ:DISH) is the most popular stock in this table. On the other hand Xylem Inc (NYSE:XYL) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks IAC/InterActiveCorp (NASDAQ:IAC) is more popular among hedge funds. Our overall hedge fund sentiment score for IAC is 77.3. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. Unfortunately IAC wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on IAC were disappointed as the stock returned 6.2% since the end of the first quarter (through 6/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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