Is ILG Inc (ILG) A Good Stock To Buy?

We have been waiting for this for a year and finally the third quarter ended up showing a nice bump in the performance of small-cap stocks. Both the S&P 500 and Russell 2000 were up since the end of the second quarter, but small-cap stocks outperformed the large-cap stocks by double digits. This is important for hedge funds, which are big supporters of small-cap stocks, because their investors started pulling some of their capital out due to poor recent performance. It is very likely that equity hedge funds will deliver better risk adjusted returns in the second half of this year. In this article we are going to look at how this recent market trend affected the sentiment of hedge funds towards ILG Inc (NASDAQ:ILG), and what that likely means for the prospects of the company and its stock.

ILG Inc (NASDAQ:ILG) investors should pay attention to a decrease in enthusiasm from smart money in recent months. There were 28 hedge funds in our database with ILG positions at the end of the second quarter, 8 more than there were three months later. At the end of this article we will also compare ILG to other stocks including Shopify Inc (NYSE:SHOP), Hilltop Holdings Inc. (NYSE:HTH), and INC Research Holdings Inc (NASDAQ:INCR) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

How have hedgies been trading ILG Inc (NASDAQ:ILG)?

Heading into the fourth quarter of 2016, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 29% slide from the second quarter of 2016. By comparison, 21 hedge funds held shares or bullish call options in ILG heading into this year, so hedge fund sentiment is nearly flat for the year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Wallace Weitz’s Wallace R. Weitz & Co. has the largest position in Interval Leisure Group, Inc. (NASDAQ:ILG), worth close to $50 million, amounting to 1.9% of its total 13F portfolio. Sitting at the No. 2 spot is Eagle Capital Management, led by Boykin Curry, which holds a $46 million position. Other professional money managers with similar optimism consist of Millennium Management, one of the 10 largest hedge funds in the world, Howard Guberman’s Gruss Asset Management, and Steve Cohen’s Point72 Asset Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds, which is based on the performance of their 13F long positions in non-micro-cap stocks.

Judging by the fact that Interval Leisure Group, Inc. (NASDAQ:ILG) has encountered declining sentiment from hedge fund managers, it’s safe to say that there was a specific group of hedgies that slashed their entire stakes heading into Q4. Interestingly, Gordy Holterman and Derek Dunn’s Overland Advisors dumped the biggest position of the “upper crust” of funds monitored by Insider Monkey, worth an estimated $18.5 million in stock, and Noam Gottesman’s GLG Partners was right behind this move, as the fund sold off about $8.2 million worth of shares.

Let’s now review hedge fund activity in other stocks similar to Interval Leisure Group, Inc. (NASDAQ:ILG). These stocks are Shopify Inc (NYSE:SHOP), Hilltop Holdings Inc. (NYSE:HTH), INC Research Holdings Inc (NASDAQ:INCR), and Northstar Realty Finance Corp. (NYSE:NRF). This group of stocks’ market caps match ILG’s market cap.

As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $292 million. That figure was $285 million in ILG’s case. Northstar Realty Finance Corp. (NYSE:NRF) is the most popular stock in this table. On the other hand Hilltop Holdings Inc. (NYSE:HTH) is the least popular one with only 15 bullish hedge fund positions. Interval Leisure Group, Inc. (NASDAQ:ILG) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard NRF, SHOP, and INCR might all be better candidates to consider taking a long position in.

Disclosure: None