Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 37.6% in 2019 (through the end of November) and outperformed the broader market benchmark by 9.9 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Inter Parfums, Inc. (NASDAQ:IPAR) shareholders have witnessed a decrease in enthusiasm from smart money recently. Our calculations also showed that IPAR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most investors, hedge funds are assumed to be underperforming, outdated financial vehicles of the past. While there are greater than 8000 funds with their doors open at present, We hone in on the aristocrats of this group, around 750 funds. These hedge fund managers watch over most of all hedge funds’ total asset base, and by shadowing their unrivaled investments, Insider Monkey has unearthed a few investment strategies that have historically outperformed Mr. Market. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Chuck Royce of Royce & Associates
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a glance at the key hedge fund action regarding Inter Parfums, Inc. (NASDAQ:IPAR).
How are hedge funds trading Inter Parfums, Inc. (NASDAQ:IPAR)?
Heading into the fourth quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -24% from the previous quarter. The graph below displays the number of hedge funds with bullish position in IPAR over the last 17 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
More specifically, Royce & Associates was the largest shareholder of Inter Parfums, Inc. (NASDAQ:IPAR), with a stake worth $28.7 million reported as of the end of September. Trailing Royce & Associates was Horizon Asset Management, which amassed a stake valued at $13.8 million. Millennium Management, AQR Capital 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 Zebra Capital Management allocated the biggest weight to Inter Parfums, Inc. (NASDAQ:IPAR), around 0.75% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, designating 0.44 percent of its 13F equity portfolio to IPAR.
Due to the fact that Inter Parfums, Inc. (NASDAQ:IPAR) has faced falling interest from hedge fund managers, we can see that there is a sect of hedge funds who sold off their positions entirely last quarter. At the top of the heap, Principal Global Investors’s Columbus Circle Investors cut the largest investment of the “upper crust” of funds watched by Insider Monkey, totaling an estimated $10.9 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also sold off its stock, about $6.5 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 4 funds last quarter.
Let’s check out hedge fund activity in other stocks similar to Inter Parfums, Inc. (NASDAQ:IPAR). These stocks are Senior Housing Properties Trust (NYSE:SNH), Trustmark Corp (NASDAQ:TRMK), Cubic Corporation (NYSE:CUB), and Advanced Energy Industries, Inc. (NASDAQ:AEIS). This group of stocks’ market caps are closest to IPAR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SNH | 13 | 24349 | 0 |
| TRMK | 14 | 24310 | 0 |
| CUB | 16 | 34965 | -3 |
| AEIS | 17 | 121893 | 3 |
| Average | 15 | 51379 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $51 million. That figure was $74 million in IPAR’s case. Advanced Energy Industries, Inc. (NASDAQ:AEIS) is the most popular stock in this table. On the other hand Senior Housing Properties Trust (NYSE:SNH) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Inter Parfums, Inc. (NASDAQ:IPAR) is even less popular than SNH. Hedge funds dodged a bullet by taking a bearish stance towards IPAR. 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 IPAR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); IPAR investors were disappointed as the stock returned 0.7% 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.
