While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding International Flavors & Fragrances Inc (NYSE:IFF).
International Flavors & Fragrances Inc (NYSE:IFF) investors should pay attention to a decrease in hedge fund interest lately. International Flavors & Fragrances Inc (NYSE:IFF) was in 52 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 55. There were 55 hedge funds in our database with IFF positions at the end of the first quarter. Our calculations also showed that IFF isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, billionaire John Paulson is loading up on the miners, so we are checking out stock pitches like this mining stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we’re going to view the fresh hedge fund action surrounding International Flavors & Fragrances Inc (NYSE:IFF).
Do Hedge Funds Think IFF Is A Good Stock To Buy Now?
At the end of June, a total of 52 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from the first quarter of 2020. On the other hand, there were a total of 31 hedge funds with a bullish position in IFF a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in International Flavors & Fragrances Inc (NYSE:IFF) was held by Sachem Head Capital, which reported holding $972.5 million worth of stock at the end of June. It was followed by Laurion Capital Management with a $535.6 million position. Other investors bullish on the company included Baupost Group, First Pacific Advisors LLC, and Gates Capital Management. In terms of the portfolio weights assigned to each position Sachem Head Capital allocated the biggest weight to International Flavors & Fragrances Inc (NYSE:IFF), around 25.19% of its 13F portfolio. Covalis Capital is also relatively very bullish on the stock, earmarking 7.43 percent of its 13F equity portfolio to IFF.
Seeing as International Flavors & Fragrances Inc (NYSE:IFF) has faced bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of hedge funds that slashed their positions entirely last quarter. Interestingly, David S. Winter and David J. Millstone’s 40 North Management dumped the biggest investment of the “upper crust” of funds followed by Insider Monkey, worth close to $189.9 million in stock, and John Smith Clark’s Southpoint Capital Advisors was right behind this move, as the fund said goodbye to about $134.9 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 3 funds last quarter.
Let’s now review hedge fund activity in other stocks similar to International Flavors & Fragrances Inc (NYSE:IFF). These stocks are General Mills, Inc. (NYSE:GIS), Peloton Interactive, Inc. (NASDAQ:PTON), The Trade Desk, Inc. (NASDAQ:TTD), Motorola Solutions Inc (NYSE:MSI), Barrick Gold Corporation (NYSE:GOLD), Cognizant Technology Solutions Corp (NASDAQ:CTSH), and AFLAC Incorporated (NYSE:AFL). All of these stocks’ market caps are closest to IFF’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GIS | 37 | 744914 | 6 |
| PTON | 67 | 6123849 | 3 |
| TTD | 25 | 719961 | -10 |
| MSI | 37 | 1468893 | 8 |
| GOLD | 47 | 1234897 | -2 |
| CTSH | 41 | 2996454 | 8 |
| AFL | 33 | 268048 | -3 |
| Average | 41 | 1936717 | 1.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 41 hedge funds with bullish positions and the average amount invested in these stocks was $1937 million. That figure was $3290 million in IFF’s case. Peloton Interactive, Inc. (NASDAQ:PTON) is the most popular stock in this table. On the other hand The Trade Desk, Inc. (NASDAQ:TTD) is the least popular one with only 25 bullish hedge fund positions. International Flavors & Fragrances Inc (NYSE:IFF) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for IFF is 62.5. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 through November 5th and beat the market again by 3.1 percentage points. Unfortunately IFF wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on IFF were disappointed as the stock returned -3.3% since the end of June (through 11/5) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow International Flavors & Fragrances Inc (NYSE:IFF)
Follow International Flavors & Fragrances Inc (NYSE:IFF)
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Disclosure: None. This article was originally published at Insider Monkey.
