Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about S&P Global Inc. (NYSE:SPGI) and compare its performance to hedge funds’ consensus picks in 2019.
S&P Global Inc. (NYSE:SPGI) investors should pay attention to an increase in enthusiasm from smart money lately. SPGI was in 69 hedge funds’ portfolios at the end of September. There were 58 hedge funds in our database with SPGI positions at the end of the previous quarter. Our calculations also showed that SPGI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
In the financial world there are a lot of tools stock market investors use to assess their stock investments. A duo of the less known tools are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the top picks of the elite money managers can outperform their index-focused peers by a very impressive margin (see the details here).
William Von Mueffling of Cantillon Capital Management
We leave no stone unturned when looking for the next great investment idea. For example 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. 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 is still extremely cheap despite already gaining 20 percent. Keeping this in mind we’re going to take a peek at the recent hedge fund action regarding S&P Global Inc. (NYSE:SPGI).
Hedge fund activity in S&P Global Inc. (NYSE:SPGI)
Heading into the fourth quarter of 2019, a total of 69 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 19% from the second quarter of 2019. By comparison, 54 hedge funds held shares or bullish call options in SPGI 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.
More specifically, Cantillon Capital Management was the largest shareholder of S&P Global Inc. (NYSE:SPGI), with a stake worth $688.5 million reported as of the end of September. Trailing Cantillon Capital Management was Egerton Capital Limited, which amassed a stake valued at $469.7 million. Lone Pine Capital, Orbis Investment Management, and Farallon Capital 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 Valley Forge Capital allocated the biggest weight to S&P Global Inc. (NYSE:SPGI), around 23.04% of its 13F portfolio. IBIS Capital Partners is also relatively very bullish on the stock, setting aside 10.79 percent of its 13F equity portfolio to SPGI.
Consequently, key money managers have jumped into S&P Global Inc. (NYSE:SPGI) headfirst. Junto Capital Management, managed by James Parsons, created the most outsized position in S&P Global Inc. (NYSE:SPGI). Junto Capital Management had $38.2 million invested in the company at the end of the quarter. Sander Gerber’s Hudson Bay Capital Management also initiated a $10.3 million position during the quarter. The other funds with new positions in the stock are Matthew Tewksbury’s Stevens Capital Management, Anand Parekh’s Alyeska Investment Group, and Jeffrey Talpins’s Element Capital Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as S&P Global Inc. (NYSE:SPGI) but similarly valued. We will take a look at Zoetis Inc (NYSE:ZTS), Vale SA (NYSE:VALE), The Blackstone Group Inc. (NYSE:BX), and Crown Castle International Corp. (REIT) (NYSE:CCI). All of these stocks’ market caps resemble SPGI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ZTS | 46 | 2229489 | 6 |
| VALE | 28 | 1453835 | 7 |
| BX | 41 | 1571733 | 11 |
| CCI | 34 | 1849678 | 1 |
| Average | 37.25 | 1776184 | 6.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 37.25 hedge funds with bullish positions and the average amount invested in these stocks was $1776 million. That figure was $3925 million in SPGI’s case. Zoetis Inc (NYSE:ZTS) is the most popular stock in this table. On the other hand Vale SA (NYSE:VALE) is the least popular one with only 28 bullish hedge fund positions. Compared to these stocks S&P Global Inc. (NYSE:SPGI) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on SPGI as the stock returned 61.3% so far in 2019 (through 12/23) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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.
