We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Intercontinental Exchange Inc (NYSE:ICE) and determine whether the smart money was really smart about this stock.
Is Intercontinental Exchange Inc (NYSE:ICE) the right pick for your portfolio? Hedge funds were becoming more confident at the end of the first quarter. The number of long hedge fund bets moved up by 9. Our calculations also showed that ICE isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Noam Gottesman of GLG Partners
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to check out the latest hedge fund action encompassing Intercontinental Exchange Inc (NYSE:ICE).
How have hedgies been trading Intercontinental Exchange Inc (NYSE:ICE)?
At Q1’s end, a total of 61 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 17% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ICE over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, D. E. Shaw’s D E Shaw has the biggest position in Intercontinental Exchange Inc (NYSE:ICE), worth close to $368.9 million, accounting for 0.6% of its total 13F portfolio. The second largest stake is held by Cantillon Capital Management, managed by William von Mueffling, which holds a $357.8 million position; 4% of its 13F portfolio is allocated to the stock. Other members of the smart money that hold long positions encompass Panayotis Takis Sparaggis’s Alkeon Capital Management, David Cohen and Harold Levy’s Iridian Asset Management and Noam Gottesman’s GLG Partners. In terms of the portfolio weights assigned to each position Truvvo Partners allocated the biggest weight to Intercontinental Exchange Inc (NYSE:ICE), around 27.65% of its 13F portfolio. Permian Investment Partners is also relatively very bullish on the stock, designating 21.66 percent of its 13F equity portfolio to ICE.
As one would reasonably expect, key money managers were breaking ground themselves. Junto Capital Management, managed by James Parsons, established the most outsized position in Intercontinental Exchange Inc (NYSE:ICE). Junto Capital Management had $91.3 million invested in the company at the end of the quarter. Alex Duran and Scott Hendrickson’s Permian Investment Partners also initiated a $90.8 million position during the quarter. The following funds were also among the new ICE investors: Steve Cohen’s Point72 Asset Management, Dmitry Balyasny’s Balyasny Asset Management, and Will Cook’s Sunriver Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Intercontinental Exchange Inc (NYSE:ICE) but similarly valued. These stocks are CSX Corporation (NYSE:CSX), Air Products & Chemicals, Inc. (NYSE:APD), Shopify Inc (NYSE:SHOP), and Kimberly Clark Corporation (NYSE:KMB). This group of stocks’ market caps resemble ICE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CSX | 57 | 2811477 | 11 |
| APD | 41 | 352215 | -13 |
| SHOP | 43 | 2892013 | 13 |
| KMB | 46 | 1173309 | 9 |
| Average | 46.75 | 1807254 | 5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 46.75 hedge funds with bullish positions and the average amount invested in these stocks was $1807 million. That figure was $2491 million in ICE’s case. CSX Corporation (NYSE:CSX) is the most popular stock in this table. On the other hand Air Products & Chemicals, Inc. (NYSE:APD) is the least popular one with only 41 bullish hedge fund positions. Compared to these stocks Intercontinental Exchange Inc (NYSE:ICE) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th and still beat the market by 16.8 percentage points. Unfortunately ICE wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ICE were disappointed as the stock returned 15.3% during the second quarter (through June 25th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
