Did Hedge Funds Drop The Ball On ICF International Inc (ICFI) ?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding ICF International Inc (NASDAQ:ICFI).

ICF International Inc (NASDAQ:ICFI) has seen a decrease in support from the world’s most elite money managers lately. Our calculations also showed that ICFI isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Martin Whitman Third Avenue Management Marty Whitman

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a glance at the latest hedge fund action encompassing ICF International Inc (NASDAQ:ICFI).

How are hedge funds trading ICF International Inc (NASDAQ:ICFI)?

Heading into the third quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -12% from the first quarter of 2019. On the other hand, there were a total of 12 hedge funds with a bullish position in ICFI a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

No of Hedge Funds with ICFI Positions

Among these funds, Millennium Management held the most valuable stake in ICF International Inc (NASDAQ:ICFI), which was worth $12.2 million at the end of the second quarter. On the second spot was Third Avenue Management which amassed $8.2 million worth of shares. Moreover, Marshall Wace LLP, AQR Capital Management, and Citadel Investment Group were also bullish on ICF International Inc (NASDAQ:ICFI), allocating a large percentage of their portfolios to this stock.

Because ICF International Inc (NASDAQ:ICFI) has faced falling interest from hedge fund managers, logic holds that there were a few fund managers that decided to sell off their entire stakes in the second quarter. At the top of the heap, Matthew Hulsizer’s PEAK6 Capital Management sold off the biggest stake of the “upper crust” of funds monitored by Insider Monkey, valued at close to $0.9 million in stock. Andrew Feldstein and Stephen Siderow’s fund, Blue Mountain Capital, also cut its stock, about $0.7 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 2 funds in the second quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as ICF International Inc (NASDAQ:ICFI) but similarly valued. These stocks are MicroStrategy Incorporated (NASDAQ:MSTR), TPG RE Finance Trust, Inc. (NYSE:TRTX), Bed Bath & Beyond Inc. (NASDAQ:BBBY), and Bloom Energy Corporation (NYSE:BE). This group of stocks’ market valuations are similar to ICFI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MSTR 17 174646 -3
TRTX 9 48533 -2
BBBY 20 288496 -9
BE 11 29807 2
Average 14.25 135371 -3

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $135 million. That figure was $51 million in ICFI’s case. Bed Bath & Beyond Inc. (NASDAQ:BBBY) is the most popular stock in this table. On the other hand TPG RE Finance Trust, Inc. (NYSE:TRTX) is the least popular one with only 9 bullish hedge fund positions. ICF International Inc (NASDAQ:ICFI) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on ICFI as the stock returned 16.2% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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