Were Hedge Funds Right About Intercontinental Exchange Inc (ICE)?

In this article you are going to find out whether hedge funds think Intercontinental Exchange Inc (NYSE:ICE) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Intercontinental Exchange Inc (NYSE:ICE) a buy, sell, or hold? Prominent investors were cutting their exposure. The number of bullish hedge fund positions were cut by 11 recently. Intercontinental Exchange Inc (NYSE:ICE) was in 47 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 64. Our calculations also showed that ICE 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.

William Von Mueffling of Cantillon Capital Management

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. Now we’re going to go over the recent hedge fund action regarding Intercontinental Exchange Inc (NYSE:ICE).

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

At the end of June, a total of 47 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -19% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ICE over the last 24 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Cantillon Capital Management, managed by William von Mueffling, holds the most valuable position in Intercontinental Exchange Inc (NYSE:ICE). Cantillon Capital Management has a $498.6 million position in the stock, comprising 3.4% of its 13F portfolio. The second most bullish fund manager is Alkeon Capital Management, managed by Panayotis Takis Sparaggis, which holds a $398.3 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism include D. E. Shaw’s D E Shaw, Nicolai Tangen’s Ako Capital and Greg Poole’s Echo Street Capital Management. In terms of the portfolio weights assigned to each position Truvvo Partners allocated the biggest weight to Intercontinental Exchange Inc (NYSE:ICE), around 30.37% of its 13F portfolio. Crescent Park Management is also relatively very bullish on the stock, dishing out 6.06 percent of its 13F equity portfolio to ICE.

Because Intercontinental Exchange Inc (NYSE:ICE) has experienced bearish sentiment from hedge fund managers, it’s safe to say that there were a few fund managers that slashed their entire stakes in the second quarter. Intriguingly, James Parsons’s Junto Capital Management dumped the largest position of the 750 funds tracked by Insider Monkey, worth about $91.2 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund cut about $27.2 million worth. These transactions are interesting, as total hedge fund interest fell by 11 funds in the second quarter.

Let’s now review hedge fund activity in other stocks similar to Intercontinental Exchange Inc (NYSE:ICE). These stocks are Norfolk Southern Corp. (NYSE:NSC), Bank of Montreal (NYSE:BMO), Edwards Lifesciences Corporation (NYSE:EW), Atlassian Corporation Plc (NASDAQ:TEAM), Autodesk, Inc. (NASDAQ:ADSK), The Southern Company (NYSE:SO), and Air Products & Chemicals, Inc. (NYSE:APD). All of these stocks’ market caps are similar to ICE’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 46 hedge funds with bullish positions and the average amount invested in these stocks was $1729 million. That figure was $2946 million in ICE’s case. Atlassian Corporation Plc (NASDAQ:TEAM) is the most popular stock in this table. On the other hand Bank of Montreal (NYSE:BMO) is the least popular one with only 12 bullish hedge fund positions. Intercontinental Exchange Inc (NYSE:ICE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ICE is 49.7. 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. Hedge funds were also right about betting on ICE as the stock returned 15% since the end of Q2 (through 11/5) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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