Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Intercorp Financial Services Inc. (NYSE:IFS).
Is Intercorp Financial Services Inc. (NYSE:IFS) a buy, sell, or hold? Money managers are betting on the stock. The number of bullish hedge fund positions increased by 3 lately. Our calculations also showed that IFS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). IFS was in 3 hedge funds’ portfolios at the end of September. There were 0 hedge funds in our database with IFS holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world, there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best-performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Israel Englander of Millennium Management
We leave no stone unturned when looking for the next great investment idea. For example, Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind let’s take a look at the fresh hedge fund action regarding Intercorp Financial Services Inc. (NYSE:IFS).
What have hedge funds been doing with Intercorp Financial Services Inc. (NYSE:IFS)?
At Q3’s end, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3 from the previous quarter. By comparison, 0 hedge funds held shares or bullish call options in IFS a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Millennium Management held the most valuable stake in Intercorp Financial Services Inc. (NYSE:IFS), which was worth $5.6 million at the end of the third quarter. On the second spot was Prince Street Capital Management which amassed $2.6 million worth of shares. Discovery Capital Management was 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 Prince Street Capital Management allocated the biggest weight to Intercorp Financial Services Inc. (NYSE:IFS), around 1.66% of its 13F portfolio. Discovery Capital Management is also relatively very bullish on the stock, dishing out 0.25 percent of its 13F equity portfolio to IFS.
As industrywide interest jumped, specific money managers were breaking ground themselves. Millennium Management, managed by Israel Englander, created the largest position in Intercorp Financial Services Inc. (NYSE:IFS). Millennium Management had $5.6 million invested in the company at the end of the quarter. David Halpert’s Prince Street Capital Management also made a $2.6 million investment in the stock during the quarter. The only other fund with a new position in the stock is Rob Citrone’s Discovery Capital Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Intercorp Financial Services Inc. (NYSE:IFS) but similarly valued. These stocks are YY Inc (NASDAQ:YY), First Financial Bankshares Inc (NASDAQ:FFIN), Cinemark Holdings, Inc. (NYSE:CNK), and ALLETE Inc (NYSE:ALE). All of these stocks’ market caps match IFS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| YY | 17 | 192246 | -5 |
| FFIN | 16 | 25822 | 4 |
| CNK | 19 | 232969 | -3 |
| ALE | 19 | 278228 | -5 |
| Average | 17.75 | 182316 | -2.25 |
View the table here if you experience formatting issues.
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $182 million. That figure was $10 million in IFS’s case. Cinemark Holdings, Inc. (NYSE:CNK) is the most popular stock in this table. On the other hand, First Financial Bankshares Inc (NASDAQ:FFIN) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Intercorp Financial Services Inc. (NYSE:IFS) is even less popular than FFIN. Hedge funds dodged a bullet by taking a bearish stance towards IFS. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately, IFS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); IFS investors were disappointed as the stock returned -2.3% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large-cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.