We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s take a look at whether Interpublic Group of Companies Inc (NYSE:IPG) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is Interpublic Group of Companies Inc (NYSE:IPG) a buy right now? Investors who are in the know are becoming less confident. The number of long hedge fund bets were trimmed by 1 recently. Our calculations also showed that IPG isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). IPG was in 26 hedge funds’ portfolios at the end of December. There were 27 hedge funds in our database with IPG positions at the end of the previous quarter.
In the eyes of most shareholders, hedge funds are viewed as worthless, outdated financial tools of years past. While there are more than 8000 funds in operation at the moment, Our experts choose to focus on the aristocrats of this group, approximately 850 funds. These investment experts administer bulk of the smart money’s total asset base, and by keeping track of their top stock picks, Insider Monkey has unearthed a few investment strategies that have historically defeated the broader indices. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Richard S. Pzena of Pzena Investment Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s go over the latest hedge fund action regarding Interpublic Group of Companies Inc (NYSE:IPG).
How are hedge funds trading Interpublic Group of Companies Inc (NYSE:IPG)?
Heading into the first quarter of 2020, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from one quarter earlier. By comparison, 29 hedge funds held shares or bullish call options in IPG a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Pzena Investment Management held the most valuable stake in Interpublic Group of Companies Inc (NYSE:IPG), which was worth $405.8 million at the end of the third quarter. On the second spot was Ariel Investments which amassed $210 million worth of shares. GAMCO Investors, AQR Capital Management, and Two Sigma Advisors 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 Ariel Investments allocated the biggest weight to Interpublic Group of Companies Inc (NYSE:IPG), around 2.63% of its 13F portfolio. Pzena Investment Management is also relatively very bullish on the stock, dishing out 1.9 percent of its 13F equity portfolio to IPG.
Due to the fact that Interpublic Group of Companies Inc (NYSE:IPG) has witnessed declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there exists a select few fund managers that decided to sell off their full holdings heading into Q4. Interestingly, Ray Dalio’s Bridgewater Associates cut the biggest stake of the “upper crust” of funds followed by Insider Monkey, valued at an estimated $20.7 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also sold off its stock, about $1.2 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 1 funds heading into Q4.
Let’s go over hedge fund activity in other stocks similar to Interpublic Group of Companies Inc (NYSE:IPG). These stocks are Western Gas Partners, LP (NYSE:WES), OGE Energy Corp. (NYSE:OGE), Kilroy Realty Corp (NYSE:KRC), and Zions Bancorporation (NASDAQ:ZION). This group of stocks’ market valuations are similar to IPG’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WES | 13 | 96321 | 2 |
| OGE | 17 | 156625 | 0 |
| KRC | 18 | 182727 | -8 |
| ZION | 43 | 597267 | 13 |
| Average | 22.75 | 258235 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $258 million. That figure was $755 million in IPG’s case. Zions Bancorporation (NASDAQ:ZION) is the most popular stock in this table. On the other hand Western Gas Partners, LP (NYSE:WES) is the least popular one with only 13 bullish hedge fund positions. Interpublic Group of Companies Inc (NYSE:IPG) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately IPG wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on IPG were disappointed as the stock returned -33.6% during the same time period 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 many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
