Is IFF Stock A Buy or Sell?

Is International Flavors & Fragrances Inc (NYSE:IFF) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Is IFF stock a buy or sell? International Flavors & Fragrances Inc (NYSE:IFF) was in 33 hedge funds’ portfolios at the end of December. The all time high for this statistic is 31. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. IFF has experienced an increase in enthusiasm from smart money in recent months. There were 31 hedge funds in our database with IFF holdings at the end of September. Our calculations also showed that IFF isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).

Matthew Halbower of Pentwater Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we heard that billionaire Peter Thiel is backing this psychedelic-drug startup. So, we are taking a closer look at this space. We go through lists like the 10 best biotech stocks under $10 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. With all of this in mind let’s take a look at the key hedge fund action surrounding International Flavors & Fragrances Inc (NYSE:IFF).

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

At Q4’s end, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the previous quarter. The graph below displays the number of hedge funds with bullish position in IFF over the last 22 quarters. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

More specifically, Pentwater Capital Management was the largest shareholder of International Flavors & Fragrances Inc (NYSE:IFF), with a stake worth $92 million reported as of the end of December. Trailing Pentwater Capital Management was Laurion Capital Management, which amassed a stake valued at $77.3 million. Clearfield Capital, First Pacific Advisors LLC, and GAMCO Investors 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 Clearfield Capital allocated the biggest weight to International Flavors & Fragrances Inc (NYSE:IFF), around 36.19% of its 13F portfolio. Jet Capital Investors is also relatively very bullish on the stock, dishing out 8.01 percent of its 13F equity portfolio to IFF.

As one would reasonably expect, key hedge funds were leading the bulls’ herd. Pentwater Capital Management, managed by Matthew Halbower, created the most outsized position in International Flavors & Fragrances Inc (NYSE:IFF). Pentwater Capital Management had $92 million invested in the company at the end of the quarter. Philip Hilal’s Clearfield Capital also made a $73 million investment in the stock during the quarter. The following funds were also among the new IFF investors: Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC, Matthew Mark’s Jet Capital Investors, and John A. Levin’s Levin Capital Strategies.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as International Flavors & Fragrances Inc (NYSE:IFF) but similarly valued. We will take a look at Chegg Inc (NYSE:CHGG), Essential Utilities Inc (NYSE:WTRG), PulteGroup, Inc. (NYSE:PHM), Equity Lifestyle Properties, Inc. (NYSE:ELS), Lamb Weston Holdings, Inc. (NYSE:LW), Five9 Inc (NASDAQ:FIVN), and Fidelity National Financial Inc (NYSE:FNF). This group of stocks’ market values match IFF’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.3 hedge funds with bullish positions and the average amount invested in these stocks was $917 million. That figure was $488 million in IFF’s case. Five9 Inc (NASDAQ:FIVN) is the most popular stock in this table. On the other hand Essential Utilities Inc (NYSE:WTRG) is the least popular one with only 13 bullish hedge fund positions. International Flavors & Fragrances Inc (NYSE:IFF) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for IFF is 66.4. 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 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 still beat the market by 0.4 percentage points. Hedge funds were also right about betting on IFF as the stock returned 28.3% since the end of Q4 (through 4/1) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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