Is Intercorp Financial Services Inc. (IFS) 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 Intercorp Financial Services Inc. (NYSE:IFS)? The smart money sentiment can provide an answer to this question.

Is IFS a good stock to buy now? The smart money was in a bearish mood. The number of long hedge fund bets dropped by 1 lately. Intercorp Financial Services Inc. (NYSE:IFS) was in 5 hedge funds’ portfolios at the end of March. The all time high for this statistic is 6. Our calculations also showed that IFS isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Cliff Asness of AQR Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $23 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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 key hedge fund action encompassing Intercorp Financial Services Inc. (NYSE:IFS).

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

At the end of the first quarter, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from the previous quarter. By comparison, 2 hedge funds held shares or bullish call options in IFS a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

Among these funds, NWI Management held the most valuable stake in Intercorp Financial Services Inc. (NYSE:IFS), which was worth $30.9 million at the end of the fourth quarter. On the second spot was Discovery Capital Management which amassed $2.3 million worth of shares. AQR Capital Management, Millennium Management, and Citadel Investment Group 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 NWI Management allocated the biggest weight to Intercorp Financial Services Inc. (NYSE:IFS), around 2.57% of its 13F portfolio. Discovery Capital Management is also relatively very bullish on the stock, dishing out 0.31 percent of its 13F equity portfolio to IFS.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: ExodusPoint Capital. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified IFS as a viable investment and initiated a position in the stock.

Let’s now review hedge fund activity in other stocks similar to Intercorp Financial Services Inc. (NYSE:IFS). We will take a look at Apellis Pharmaceuticals, Inc. (NASDAQ:APLS), Meritage Homes Corp (NYSE:MTH), iRobot Corporation (NASDAQ:IRBT), Blackbaud, Inc. (NASDAQ:BLKB), InnovAge Holding Corp. (NASDAQ:INNV), Weingarten Realty Investors (NYSE:WRI), and PDC Energy Inc (NASDAQ:PDCE). All of these stocks’ market caps resemble IFS’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.4 hedge funds with bullish positions and the average amount invested in these stocks was $282 million. That figure was $35 million in IFS’s case. Apellis Pharmaceuticals, Inc. (NASDAQ:APLS) is the most popular stock in this table. On the other hand Weingarten Realty Investors (NYSE:WRI) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Intercorp Financial Services Inc. (NYSE:IFS) is even less popular than WRI. Our overall hedge fund sentiment score for IFS is 29. 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. Hedge funds dodged a bullet by taking a bearish stance towards IFS. Our calculations showed that the top 10 most popular hedge fund stocks returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th but managed to beat the market again by 6.1 percentage points. Unfortunately IFS wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was very bearish); IFS investors were disappointed as the stock returned -12.8% since the end of the first quarter (through 6/18) 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.