Was The Smart Money Right About IAC/InterActiveCorp (IAC)?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of IAC/InterActiveCorp (NASDAQ:IAC).

IAC/InterActiveCorp (NASDAQ:IAC) investors should pay attention to a decrease in activity from the world’s largest hedge funds of late. IAC/InterActiveCorp (NASDAQ:IAC) was in 67 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 72. There were 72 hedge funds in our database with IAC holdings at the end of September. Our calculations also showed that IAC isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).

Christian Leone of Luxor Capital Group

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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 website. With all of this in mind let’s check out the fresh hedge fund action regarding IAC/InterActiveCorp (NASDAQ:IAC).

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

At the end of December, a total of 67 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from the previous quarter. On the other hand, there were a total of 71 hedge funds with a bullish position in IAC 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.

The largest stake in IAC/InterActiveCorp (NASDAQ:IAC) was held by Luxor Capital Group, which reported holding $286.9 million worth of stock at the end of December. It was followed by ShawSpring Partners with a $194 million position. Other investors bullish on the company included Echo Street Capital Management, Scopus Asset Management, and Iridian Asset Management. In terms of the portfolio weights assigned to each position ShawSpring Partners allocated the biggest weight to IAC/InterActiveCorp (NASDAQ:IAC), around 27.38% of its 13F portfolio. Tiger Eye Capital is also relatively very bullish on the stock, earmarking 18.78 percent of its 13F equity portfolio to IAC.

Because IAC/InterActiveCorp (NASDAQ:IAC) has experienced a decline in interest from the aggregate hedge fund industry, we can see that there was a specific group of hedge funds that decided to sell off their positions entirely last quarter. Interestingly, Andrew Rechtschaffen’s AREX Capital Management said goodbye to the biggest investment of the “upper crust” of funds tracked by Insider Monkey, comprising close to $60.4 million in stock, and Himanshu Gulati’s Antara Capital was right behind this move, as the fund dropped about $28 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 5 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to IAC/InterActiveCorp (NASDAQ:IAC). These stocks are Royal Caribbean Group (NYSE:RCL), United Rentals, Inc. (NYSE:URI), Halliburton Company (NYSE:HAL), Trimble Inc. (NASDAQ:TRMB), Zendesk Inc (NYSE:ZEN), Energy Transfer L.P. (NYSE:ET), and HEICO Corporation (NYSE:HEI). This group of stocks’ market valuations match IAC’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.4 hedge funds with bullish positions and the average amount invested in these stocks was $1023 million. That figure was $2231 million in IAC’s case. Zendesk Inc (NYSE:ZEN) is the most popular stock in this table. On the other hand Trimble Inc. (NASDAQ:TRMB) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks IAC/InterActiveCorp (NASDAQ:IAC) is more popular among hedge funds. Our overall hedge fund sentiment score for IAC is 77.9. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks returned 12.3% in 2021 through April 19th but still managed to beat the market by 0.9 percentage points. Hedge funds were also right about betting on IAC as the stock returned 28.5% since the end of December (through 4/19) 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.

Disclosure: None. This article was originally published at Insider Monkey.