Were Hedge Funds Right About Shunning Intuit Inc. (INTU)?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, 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 you are going to find out whether hedge funds thoughtIntuit Inc. (NASDAQ:INTU) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Hedge fund interest in Intuit Inc. (NASDAQ:INTU) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as S&P Global Inc. (NYSE:SPGI), Prologis Inc (NYSE:PLD), and Duke Energy Corporation (NYSE:DUK) to gather more data points. Our calculations also showed that INTU 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.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

James Dondero of Highland Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, this trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost gold prices. So, we are checking out this junior gold mining stock. 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. With all of this in mind we’re going to take a look at the key hedge fund action surrounding Intuit Inc. (NASDAQ:INTU).

How have hedgies been trading Intuit Inc. (NASDAQ:INTU)?

At Q1’s end, a total of 54 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards INTU over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

The largest stake in Intuit Inc. (NASDAQ:INTU) was held by AQR Capital Management, which reported holding $381.5 million worth of stock at the end of September. It was followed by GQG Partners with a $294.3 million position. Other investors bullish on the company included Arrowstreet Capital, GLG Partners, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Blue Whale Capital allocated the biggest weight to Intuit Inc. (NASDAQ:INTU), around 5.85% of its 13F portfolio. Bristol Gate Capital Partners is also relatively very bullish on the stock, earmarking 5.06 percent of its 13F equity portfolio to INTU.

Because Intuit Inc. (NASDAQ:INTU) has faced declining sentiment from the smart money, it’s easy to see that there was a specific group of fund managers who sold off their entire stakes in the first quarter. It’s worth mentioning that Philippe Laffont’s Coatue Management sold off the largest stake of the 750 funds tracked by Insider Monkey, worth an estimated $22.9 million in stock. Matthew Hulsizer’s fund, PEAK6 Capital Management, also said goodbye to its stock, about $10.5 million worth. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks similar to Intuit Inc. (NASDAQ:INTU). These stocks are S&P Global Inc. (NYSE:SPGI), Prologis Inc (NYSE:PLD), Duke Energy Corporation (NYSE:DUK), and JD.Com Inc (NASDAQ:JD). This group of stocks’ market values are similar to INTU’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 59.5 hedge funds with bullish positions and the average amount invested in these stocks was $3133 million. That figure was $1557 million in INTU’s case. JD.Com Inc (NASDAQ:JD) is the most popular stock in this table. On the other hand Duke Energy Corporation (NYSE:DUK) is the least popular one with only 35 bullish hedge fund positions. Intuit Inc. (NASDAQ:INTU) is not the least popular stock in this group but hedge fund interest is still below average. 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 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on INTU as the stock returned 29.1% during the second quarter and outperformed the market by an even larger margin.

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