There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Jeff Ubben, George Soros and Carl Icahn think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other elite funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze InterXion Holding NV (NYSE:INXN).
InterXion Holding NV (NYSE:INXN) investors should pay attention to an increase in activity from the world’s largest hedge funds in recent months. Our calculations also showed that INXN isn’t among the 30 most popular stocks among hedge funds (view the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to review the new hedge fund action encompassing InterXion Holding NV (NYSE:INXN).
What have hedge funds been doing with InterXion Holding NV (NYSE:INXN)?
Heading into the third quarter of 2019, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of 36% from the previous quarter. By comparison, 35 hedge funds held shares or bullish call options in INXN a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
More specifically, Eminence Capital was the largest shareholder of InterXion Holding NV (NYSE:INXN), with a stake worth $145.9 million reported as of the end of March. Trailing Eminence Capital was Echo Street Capital Management, which amassed a stake valued at $143.3 million. Jericho Capital Asset Management, Rivulet Capital, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
Consequently, specific money managers have been driving this bullishness. Zimmer Partners, managed by Stuart J. Zimmer, created the most valuable position in InterXion Holding NV (NYSE:INXN). Zimmer Partners had $19 million invested in the company at the end of the quarter. Guy Shahar’s DSAM Partners also made a $16.7 million investment in the stock during the quarter. The other funds with brand new INXN positions are Louis Bacon’s Moore Global Investments, David Harding’s Winton Capital Management, and Jeffrey Talpins’s Element Capital Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as InterXion Holding NV (NYSE:INXN) but similarly valued. We will take a look at World Wrestling Entertainment, Inc. (NYSE:WWE), Companhia Siderurgica Nacional (NYSE:SID), H&R Block, Inc. (NYSE:HRB), and Chemed Corporation (NYSE:CHE). This group of stocks’ market valuations are closest to INXN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WWE | 39 | 978036 | -8 |
| SID | 10 | 37735 | 2 |
| HRB | 25 | 381222 | 9 |
| CHE | 21 | 406059 | 0 |
| Average | 23.75 | 450763 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.75 hedge funds with bullish positions and the average amount invested in these stocks was $451 million. That figure was $755 million in INXN’s case. World Wrestling Entertainment, Inc. (NYSE:WWE) is the most popular stock in this table. On the other hand Companhia Siderurgica Nacional (NYSE:SID) is the least popular one with only 10 bullish hedge fund positions. InterXion Holding NV (NYSE:INXN) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on INXN as the stock returned 7.1% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
