Is IHS Markit Ltd. (INFO) Going to Burn These Hedge Funds?

Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards IHS Markit Ltd. (NYSE:INFO).

IHS Markit Ltd. (NYSE:INFO) investors should pay attention to a decrease in hedge fund interest of late. IHS Markit Ltd. (NYSE:INFO) was in 54 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 59. There were 59 hedge funds in our database with INFO positions at the end of the fourth quarter. Our calculations also showed that INFO 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. 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 115 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Paul Glazer of Glazer Capital

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. Keeping this in mind we’re going to review the fresh hedge fund action encompassing IHS Markit Ltd. (NYSE:INFO).

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

At Q1’s end, a total of 54 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in INFO over the last 23 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Among these funds, Select Equity Group held the most valuable stake in IHS Markit Ltd. (NYSE:INFO), which was worth $586.5 million at the end of the fourth quarter. On the second spot was Pentwater Capital Management which amassed $486.3 million worth of shares. Citadel Investment Group, D E Shaw, and Millennium 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 Sand Grove Capital Partners allocated the biggest weight to IHS Markit Ltd. (NYSE:INFO), around 16.93% of its 13F portfolio. ROAM Global Management is also relatively very bullish on the stock, designating 10.3 percent of its 13F equity portfolio to INFO.

Judging by the fact that IHS Markit Ltd. (NYSE:INFO) 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 funds that slashed their full holdings in the first quarter. Intriguingly, Robert Pohly’s Samlyn Capital said goodbye to the largest position of the “upper crust” of funds tracked by Insider Monkey, comprising an estimated $67.3 million in stock, and Noam Gottesman’s GLG Partners was right behind this move, as the fund dumped about $49.1 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 5 funds in the first quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as IHS Markit Ltd. (NYSE:INFO) but similarly valued. We will take a look at CrowdStrike Holdings, Inc. (NASDAQ:CRWD), BCE Inc. (NYSE:BCE), Parker-Hannifin Corporation (NYSE:PH), Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC), Bilibili Inc. (NASDAQ:BILI), SYSCO Corporation (NYSE:SYY), and Sempra Energy (NYSE:SRE). All of these stocks’ market caps are similar to INFO’s market cap.

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As you can see these stocks had an average of 38.7 hedge funds with bullish positions and the average amount invested in these stocks was $1898 million. That figure was $4094 million in INFO’s case. CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is the most popular stock in this table. On the other hand BCE Inc. (NYSE:BCE) is the least popular one with only 10 bullish hedge fund positions. IHS Markit Ltd. (NYSE:INFO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for INFO is 60.3. 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. Hedge funds were also right about betting on INFO as the stock returned 12.6% since the end of Q1 (through 6/11) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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