Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks aren’t doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to IAC/InterActiveCorp (NASDAQ:IAC) changed recently.
Is IAC/InterActiveCorp (NASDAQ:IAC) a good stock to buy now? IAC was in 72 hedge funds’ portfolios at the end of September. The all time high for this statistics is 71. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. IAC has experienced an increase in activity from the world’s largest hedge funds in recent months. There were 60 hedge funds in our database with IAC holdings at the end of June. Our calculations also showed that IAC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Sahm Adrangi of Kerrisdale Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets. Tesla’s stock price skyrocketed, yet lithium prices are still below their 2019 highs. So, we are checking out this lithium stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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. With all of this in mind we’re going to take a peek at the recent hedge fund action surrounding IAC/InterActiveCorp (NASDAQ:IAC).
What have hedge funds been doing with IAC/InterActiveCorp (NASDAQ:IAC)?
At the end of the third quarter, a total of 72 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in IAC over the last 21 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
More specifically, Luxor Capital Group was the largest shareholder of IAC/InterActiveCorp (NASDAQ:IAC), with a stake worth $481.7 million reported as of the end of September. Trailing Luxor Capital Group was ShawSpring Partners, which amassed a stake valued at $98.9 million. Echo Street Capital Management, AREX Capital Management, and Scopus Asset Management 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 AREX Capital Management allocated the biggest weight to IAC/InterActiveCorp (NASDAQ:IAC), around 38.79% of its 13F portfolio. ShawSpring Partners is also relatively very bullish on the stock, setting aside 20.1 percent of its 13F equity portfolio to IAC.
As aggregate interest increased, key money managers were leading the bulls’ herd. Echo Street Capital Management, managed by Greg Poole, created the most valuable position in IAC/InterActiveCorp (NASDAQ:IAC). Echo Street Capital Management had $88.7 million invested in the company at the end of the quarter. Harry Gail’s Harspring Capital Management also made a $53.4 million investment in the stock during the quarter. The following funds were also among the new IAC investors: Sahm Adrangi’s Kerrisdale Capital, Steve Cohen’s Point72 Asset Management, and Tim David’s Guardian Point Capital.
Let’s also examine hedge fund activity in other stocks similar to IAC/InterActiveCorp (NASDAQ:IAC). These stocks are United Airlines Holdings Inc (NASDAQ:UAL), Penn National Gaming, Inc (NASDAQ:PENN), Franklin Resources, Inc. (NYSE:BEN), ICON Public Limited Company (NASDAQ:ICLR), Entegris Inc (NASDAQ:ENTG), Annaly Capital Management, Inc. (NYSE:NLY), and Raymond James Financial, Inc. (NYSE:RJF). This group of stocks’ market valuations resemble IAC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UAL | 40 | 735205 | 2 |
| PENN | 45 | 1183254 | 11 |
| BEN | 33 | 414803 | -3 |
| ICLR | 24 | 621133 | 0 |
| ENTG | 25 | 1061024 | -3 |
| NLY | 27 | 337862 | 6 |
| RJF | 28 | 449873 | -7 |
| Average | 31.7 | 686165 | 0.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.7 hedge funds with bullish positions and the average amount invested in these stocks was $686 million. That figure was $1613 million in IAC’s case. Penn National Gaming, Inc (NASDAQ:PENN) is the most popular stock in this table. On the other hand ICON Public Limited Company (NASDAQ:ICLR) is the least popular one with only 24 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 90. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 30.7% in 2020 through November 27th but still managed to beat the market by 16.1 percentage points. Hedge funds were also right about betting on IAC as the stock returned 19% since the end of September (through 11/27) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
