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2019 Review: Top Hedge Fund Stocks vs. InterXion Holding NV (INXN)

2018’s fourth quarter was a rough one for investors and many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 41.3% in 2019 and outperformed the S&P 500 ETF by more than 10 percentage points. In this article we will study how hedge fund sentiment towards InterXion Holding NV (NYSE:INXN) changed during the third quarter and how the stock performed in comparison to hedge fund consensus stocks.

InterXion Holding NV (NYSE:INXN) has experienced a decrease in hedge fund sentiment in recent months. INXN was in 29 hedge funds’ portfolios at the end of the third quarter of 2019. There were 34 hedge funds in our database with INXN holdings at the end of the previous quarter. Our calculations also showed that INXN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 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.

Ricky Sandler of Eminence Capital

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. Keeping this in mind we’re going to check out the key hedge fund action encompassing InterXion Holding NV (NYSE:INXN).

How are hedge funds trading InterXion Holding NV (NYSE:INXN)?

At Q3’s end, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -15% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in INXN over the last 17 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Greg Poole’s Echo Street Capital Management has the number one position in InterXion Holding NV (NYSE:INXN), worth close to $133.8 million, comprising 2.3% of its total 13F portfolio. The second largest stake is held by Eminence Capital, led by Ricky Sandler, holding a $102.8 million position; 1.2% of its 13F portfolio is allocated to the stock. Other peers with similar optimism comprise Josh Resnick’s Jericho Capital Asset Management, Barry Lebovits and Joshua Kuntz’s Rivulet Capital and Louis Bacon’s Moore Global Investments. In terms of the portfolio weights assigned to each position SkyTop Capital Management allocated the biggest weight to InterXion Holding NV (NYSE:INXN), around 11.14% of its 13F portfolio. Rivulet Capital is also relatively very bullish on the stock, dishing out 6.96 percent of its 13F equity portfolio to INXN.

Because InterXion Holding NV (NYSE:INXN) has faced falling interest from the smart money, it’s easy to see that there was a specific group of funds who sold off their positions entirely last quarter. Intriguingly, Ken Griffin’s Citadel Investment Group cut the biggest investment of all the hedgies watched by Insider Monkey, worth close to $36.7 million in stock. Jeffrey Talpins’s fund, Element Capital Management, also sold off its stock, about $3.2 million worth. These moves are important to note, as aggregate hedge fund interest fell by 5 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as InterXion Holding NV (NYSE:INXN) but similarly valued. We will take a look at PRA Health Sciences Inc (NASDAQ:PRAH), Arrow Electronics, Inc. (NYSE:ARW), Unum Group (NYSE:UNM), and Knight-Swift Transportation Holdings Inc. (NYSE:KNX). This group of stocks’ market caps are closest to INXN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PRAH 31 588717 6
ARW 22 536478 5
UNM 23 474210 -2
KNX 22 303434 -1
Average 24.5 475710 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $476 million. That figure was $656 million in INXN’s case. PRA Health Sciences Inc (NASDAQ:PRAH) is the most popular stock in this table. On the other hand Arrow Electronics, Inc. (NYSE:ARW) is the least popular one with only 22 bullish hedge fund positions. InterXion Holding NV (NYSE:INXN) is not the most popular stock in this group but hedge fund interest is still above average. 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 10.1 percentage points. Hedge funds were also right about betting on INXN as the stock returned 54.7% in 2019 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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