Were Hedge Funds Right About IAC/InterActiveCorp (IAC)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the fourth quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of IAC/InterActiveCorp (NASDAQ:IAC) based on that data.

IAC/InterActiveCorp (NASDAQ:IAC) has experienced a decrease in hedge fund interest lately. IAC/InterActiveCorp (NASDAQ:IAC) was in 63 hedge funds’ portfolios at the end of March. The all time high for this statistic is 72. Our calculations also showed that IAC isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Gabriel Plotkin of Melvin Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium 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. Keeping this in mind we’re going to take a glance at the latest hedge fund action regarding IAC/InterActiveCorp (NASDAQ:IAC).

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

At Q1’s end, a total of 63 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the previous quarter. The graph below displays the number of hedge funds with bullish position in IAC over the last 23 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Melvin Capital Management was the largest shareholder of IAC/InterActiveCorp (NASDAQ:IAC), with a stake worth $328.8 million reported as of the end of March. Trailing Melvin Capital Management was ShawSpring Partners, which amassed a stake valued at $293.8 million. Echo Street Capital Management, Scopus Asset Management, and Scopus Asset Management 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 36.63% of its 13F portfolio. Harspring Capital Management is also relatively very bullish on the stock, designating 12.95 percent of its 13F equity portfolio to IAC.

Since IAC/InterActiveCorp (NASDAQ:IAC) has faced falling interest from the smart money, it’s safe to say that there lies a certain “tier” of hedge funds that elected to cut their full holdings by the end of the first quarter. Intriguingly, Christian Leone’s Luxor Capital Group dropped the biggest position of all the hedgies monitored by Insider Monkey, worth an estimated $286.9 million in stock, and Keith Meister’s Corvex Capital was right behind this move, as the fund said goodbye to about $69.1 million worth. These moves are interesting, as total hedge fund interest dropped by 4 funds by the end of the first quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as IAC/InterActiveCorp (NASDAQ:IAC) but similarly valued. These stocks are KeyCorp (NYSE:KEY), Hologic, Inc. (NASDAQ:HOLX), ZoomInfo Technologies Inc. (NASDAQ:ZI), Halliburton Company (NYSE:HAL), DISH Network Corp. (NASDAQ:DISH), Xylem Inc (NYSE:XYL), and StoneCo Ltd. (NASDAQ:STNE). This group of stocks’ market caps are closest to IAC’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 34 hedge funds with bullish positions and the average amount invested in these stocks was $1090 million. That figure was $2102 million in IAC’s case. DISH Network Corp. (NASDAQ:DISH) is the most popular stock in this table. On the other hand Xylem Inc (NYSE:XYL) is the least popular one with only 23 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 77.3. 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 25.8% in 2021 through August 6th and still beat the market by 6.7 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 -9.6% since the end of the first quarter (through 8/6) 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.

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