Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards IAC/InterActiveCorp (NASDAQ:IAC).
IAC/InterActiveCorp (NASDAQ:IAC) investors should be aware of a decrease in hedge fund interest in recent months. IAC/InterActiveCorp (NASDAQ:IAC) was in 50 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 72. There were 63 hedge funds in our database with IAC positions at the end of the first quarter. Our calculations also showed that IAC isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
In today’s marketplace there are dozens of methods investors employ to evaluate publicly traded companies. Some of the best methods are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the best picks of the best investment managers can outclass the broader indices by a superb margin (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.
Sahm Adrangi of Kerrisdale Capital
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 let’s go over the key hedge fund action encompassing IAC/InterActiveCorp (NASDAQ:IAC).
Do Hedge Funds Think IAC Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 50 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -21% from one quarter earlier. By comparison, 60 hedge funds held shares or bullish call options in IAC a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, ShawSpring Partners held the most valuable stake in IAC/InterActiveCorp (NASDAQ:IAC), which was worth $292.4 million at the end of the second quarter. On the second spot was Echo Street Capital Management which amassed $146.3 million worth of shares. Holocene Advisors, Harspring Capital Management, and Kerrisdale 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 ShawSpring Partners allocated the biggest weight to IAC/InterActiveCorp (NASDAQ:IAC), around 27.78% of its 13F portfolio. Harspring Capital Management is also relatively very bullish on the stock, dishing out 9.35 percent of its 13F equity portfolio to IAC.
Seeing as IAC/InterActiveCorp (NASDAQ:IAC) has witnessed falling interest from the smart money, logic holds that there was a specific group of fund managers that elected to cut their full holdings last quarter. Interestingly, Gabriel Plotkin’s Melvin Capital Management sold off the largest stake of the “upper crust” of funds tracked by Insider Monkey, totaling close to $328.8 million in stock. Alexander Mitchell’s fund, Scopus Asset Management, also sold off its stock, about $119 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 13 funds last quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as IAC/InterActiveCorp (NASDAQ:IAC) but similarly valued. We will take a look at Tuya Inc. (NYSE:TUYA), RLX Technology Inc. (NYSE:RLX), CureVac N.V. (NASDAQ:CVAC), Whirlpool Corporation (NYSE:WHR), American Airlines Group Inc (NASDAQ:AAL), Centrais Elétricas Brasileiras S.A. – Eletrobrás (NYSE:EBR), and UWM Holdings Corporation (NYSE:UWMC). This group of stocks’ market caps are similar to IAC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TUYA | 8 | 224184 | -7 |
| RLX | 12 | 192836 | -11 |
| CVAC | 12 | 24977 | 3 |
| WHR | 32 | 1175762 | 4 |
| AAL | 25 | 620239 | -7 |
| EBR | 5 | 3151 | 0 |
| UWMC | 20 | 66732 | 1 |
| Average | 16.3 | 329697 | -2.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.3 hedge funds with bullish positions and the average amount invested in these stocks was $330 million. That figure was $1226 million in IAC’s case. Whirlpool Corporation (NYSE:WHR) is the most popular stock in this table. On the other hand Centrais Elétricas Brasileiras S.A. – Eletrobrás (NYSE:EBR) is the least popular one with only 5 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 62.8. 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 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 still beat the market by 3.1 percentage points. Unfortunately IAC wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on IAC were disappointed as the stock returned -5.8% since the end of the second quarter (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 most of these stocks already outperformed the market since 2019.
Follow Iac Inc. (NASDAQ:IAC)
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Disclosure: None. This article was originally published at Insider Monkey.
