Where Do Hedge Funds Stand On Independence Holding Company (IHC)?

The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Independence Holding Company (NYSE:IHC).

Independence Holding Company (NYSE:IHC) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 5 hedge funds’ portfolios at the end of September. Our calculations also showed that IHC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare IHC to other stocks including OneSpaWorld Holdings Limited (NASDAQ:OSW), Green Plains Inc. (NASDAQ:GPRE), and Genesis Energy, L.P. (NYSE:GEL) to get a better sense of its popularity.

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 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 66 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Chuck Royce of Royce & Associates

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, 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 real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. With all of this in mind we’re going to take a gander at the latest hedge fund action encompassing Independence Holding Company (NYSE:IHC).

What does smart money think about Independence Holding Company (NYSE:IHC)?

At the end of September, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. By comparison, 4 hedge funds held shares or bullish call options in IHC a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Independence Holding Company (NYSE:IHC) was held by Cannell Capital, which reported holding $14.6 million worth of stock at the end of September. It was followed by Royce & Associates with a $7.9 million position. Other investors bullish on the company included EJF Capital, Millennium Management, and Springbok Capital. In terms of the portfolio weights assigned to each position Cannell Capital allocated the biggest weight to Independence Holding Company (NYSE:IHC), around 5.35% of its 13F portfolio. EJF Capital is also relatively very bullish on the stock, earmarking 0.2 percent of its 13F equity portfolio to IHC.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Renaissance Technologies. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Millennium Management).

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Independence Holding Company (NYSE:IHC) but similarly valued. We will take a look at OneSpaWorld Holdings Limited (NASDAQ:OSW), Green Plains Inc. (NASDAQ:GPRE), Genesis Energy, L.P. (NYSE:GEL), The York Water Company (NASDAQ:YORW), Adecoagro SA (NYSE:AGRO), The Chefs Warehouse, Inc (NASDAQ:CHEF), and Fluidigm Corporation (NASDAQ:FLDM). All of these stocks’ market caps match IHC’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.6 hedge funds with bullish positions and the average amount invested in these stocks was $90 million. That figure was $26 million in IHC’s case. Fluidigm Corporation (NASDAQ:FLDM) is the most popular stock in this table. On the other hand Genesis Energy, L.P. (NYSE:GEL) is the least popular one with only 3 bullish hedge fund positions. Independence Holding Company (NYSE:IHC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for IHC is 39.2. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and surpassed the market again by 16.1 percentage points. Unfortunately IHC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); IHC investors were disappointed as the stock returned 8.2% since the end of September (through 11/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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