Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips on the charts, usually don’t make them change their opinion towards a company. The second half of 2015 and the first few months of this year was a stressful period for hedge funds. However, things have been taking a turn for the better in the second half of this year. Small-cap stocks which hedge funds are usually overweight outperformed the market by double digits and it may be a good time to pay attention to hedge funds’ picks before it is too late. In this article we are going to analyze the hedge fund sentiment towards InterContinental Hotels Group PLC (ADR) (NYSE:IHG) to find out whether it was one of their high conviction long-term ideas.
Is InterContinental Hotels Group PLC (ADR) (NYSE:IHG) a healthy stock for your portfolio? Investors who are in the know are indeed reducing their bets on the stock. The number of long hedge fund bets that are revealed through the 13F filings dropped by 1 lately. There were 7 hedge funds in our database with IHG positions 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 Targa Resources Corp (NYSE:TRGP), Spectrum Brands Holdings, Inc. (NYSE:SPB), and Mercadolibre Inc (NASDAQ:MELI) to gather more data points.
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We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
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Now, let’s take a gander at the recent action regarding InterContinental Hotels Group PLC (ADR) (NYSE:IHG).
Hedge fund activity in InterContinental Hotels Group PLC (ADR) (NYSE:IHG)
At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the previous quarter. The graph below displays the number of hedge funds with bullish position in IHG over the last 5 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Jim Simons’ Renaissance Technologies, one of the largest hedge funds in the world, has the biggest position in InterContinental Hotels Group PLC (ADR) (NYSE:IHG), worth close to $5.5 million, amounting to less than 0.1%% of its total 13F portfolio. Coming in second is Marshall Wace LLP, led by Paul Marshall and Ian Wace, which holds a $1.8 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other professional money managers that hold long positions comprise Robert B. Gillam’s McKinley Capital Management, David Costen Haley’s HBK Investments and John Overdeck and David Siegel’s Two Sigma Advisors. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Because InterContinental Hotels Group PLC (ADR) (NYSE:IHG) has gone through falling interest from the smart money, it’s safe to say that there were a few hedgies that decided to sell off their entire stakes heading into Q4. It’s worth mentioning that Israel Englander’s Millennium Management dropped the biggest investment of all the investors followed by Insider Monkey, totaling an estimated $2.2 million in stock. Lee Ainslie’s fund, Maverick Capital, also dumped its stock, about $1.2 million worth.
Let’s now review hedge fund activity in other stocks similar to InterContinental Hotels Group PLC (ADR) (NYSE:IHG). We will take a look at Targa Resources Corp (NYSE:TRGP), Spectrum Brands Holdings, Inc. (NYSE:SPB), Mercadolibre Inc (NASDAQ:MELI), and AEGON N.V. (ADR) (NYSE:AEG). All of these stocks’ market caps resemble IHG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TRGP | 30 | 466886 | 0 |
| SPB | 30 | 615857 | 7 |
| MELI | 29 | 592569 | 8 |
| AEG | 8 | 11293 | 4 |
As you can see these stocks had an average of 24.25 hedge funds with bullish positions and the average amount invested in these stocks was $422 million. That figure was $9 million in IHG’s case. Targa Resources Corp (NYSE:TRGP) is the most popular stock in this table. On the other hand AEGON N.V. (ADR) (NYSE:AEG) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks InterContinental Hotels Group PLC (ADR) (NYSE:IHG) is even less popular than AEG. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
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