Where Do Hedge Funds Stand On International Flavors & Fragrances Inc (IFF)?

In this article we will analyze whether International Flavors & Fragrances Inc (NYSE:IFF) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

International Flavors & Fragrances Inc (NYSE:IFF) was in 55 hedge funds’ portfolios at the end of March. The all time high for this statistic was previously 33. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. IFF investors should be aware of an increase in hedge fund sentiment of late. There were 33 hedge funds in our database with IFF positions at the end of the fourth quarter. Our calculations also showed that IFF isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 115 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.

Scott Ferguson of Sachem Head Capital

At Insider Monkey we leave no stone unturned when looking for 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 hydrogen fuel cell 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. With all of this in mind we’re going to go over the recent hedge fund action surrounding International Flavors & Fragrances Inc (NYSE:IFF).

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

At Q1’s end, a total of 55 of the hedge funds tracked by Insider Monkey were long this stock, a change of 67% from the fourth quarter of 2020. On the other hand, there were a total of 28 hedge funds with a bullish position in IFF a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Sachem Head Capital, managed by Scott Ferguson, holds the most valuable position in International Flavors & Fragrances Inc (NYSE:IFF). Sachem Head Capital has a $908.8 million position in the stock, comprising 24.6% of its 13F portfolio. The second largest stake is held by Benjamin A. Smith of Laurion Capital Management, with a $500.5 million position; the fund has 2.7% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish include Seth Klarman’s Baupost Group, David S. Winter and David J. Millstone’s 40 North Management and Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC. In terms of the portfolio weights assigned to each position Clearfield Capital allocated the biggest weight to International Flavors & Fragrances Inc (NYSE:IFF), around 35.68% of its 13F portfolio. Sachem Head Capital is also relatively very bullish on the stock, designating 24.59 percent of its 13F equity portfolio to IFF.

As one would reasonably expect, key hedge funds have jumped into International Flavors & Fragrances Inc (NYSE:IFF) headfirst. Sachem Head Capital, managed by Scott Ferguson, established the most valuable position in International Flavors & Fragrances Inc (NYSE:IFF). Sachem Head Capital had $908.8 million invested in the company at the end of the quarter. Seth Klarman’s Baupost Group also initiated a $293.2 million position during the quarter. The following funds were also among the new IFF investors: David S. Winter and David J. Millstone’s 40 North Management, John Smith Clark’s Southpoint Capital Advisors, and Lee Ainslie’s Maverick Capital.

Let’s go over hedge fund activity in other stocks similar to International Flavors & Fragrances Inc (NYSE:IFF). We will take a look at Banco Bilbao Vizcaya Argentaria SA (NYSE:BBVA), STMicroelectronics N.V. (NYSE:STM), MSCI Inc (NYSE:MSCI), Wipro Limited (NYSE:WIT), DexCom, Inc. (NASDAQ:DXCM), Corteva, Inc. (NYSE:CTVA), and Pioneer Natural Resources Company (NYSE:PXD). This group of stocks’ market caps match IFF’s market cap.

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As you can see these stocks had an average of 28.7 hedge funds with bullish positions and the average amount invested in these stocks was $738 million. That figure was $3603 million in IFF’s case. DexCom, Inc. (NASDAQ:DXCM) is the most popular stock in this table. On the other hand Banco Bilbao Vizcaya Argentaria SA (NYSE:BBVA) is the least popular one with only 7 bullish hedge fund positions. International Flavors & Fragrances Inc (NYSE:IFF) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for IFF is 89. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 17.2% in 2021 through June 11th and beat the market again by 3.3 percentage points. Unfortunately IFF wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on IFF were disappointed as the stock returned 5.9% since the end of March (through 6/11) 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 many of these stocks already outperformed the market since 2019.

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