Did Hedge Funds Drop The Ball On World Fuel Services Corporation (INT) ?

Hedge fund managers like David Einhorn, Bill Ackman, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: World Fuel Services Corporation (NYSE:INT).

World Fuel Services Corporation (NYSE:INT) was in 19 hedge funds’ portfolios at the end of the second quarter of 2019. INT shareholders have witnessed an increase in hedge fund sentiment lately. There were 18 hedge funds in our database with INT positions at the end of the previous quarter. Our calculations also showed that INT isn’t among the 30 most popular stocks among hedge funds (view 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Chuck Royce

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. We’re going to take a look at the key hedge fund action surrounding World Fuel Services Corporation (NYSE:INT).

How are hedge funds trading World Fuel Services Corporation (NYSE:INT)?

At the end of the second quarter, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in INT over the last 16 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

No of Hedge Funds with INT Positions

The largest stake in World Fuel Services Corporation (NYSE:INT) was held by AQR Capital Management, which reported holding $65.8 million worth of stock at the end of March. It was followed by Encompass Capital Advisors with a $27.1 million position. Other investors bullish on the company included Rubric Capital Management, Renaissance Technologies, and Royce & Associates.

Consequently, key hedge funds have jumped into World Fuel Services Corporation (NYSE:INT) headfirst. Scopus Asset Management, managed by Alexander Mitchell, initiated the most outsized position in World Fuel Services Corporation (NYSE:INT). Scopus Asset Management had $1.8 million invested in the company at the end of the quarter. Noam Gottesman’s GLG Partners also made a $1.6 million investment in the stock during the quarter. The other funds with brand new INT positions are Matthew Hulsizer’s PEAK6 Capital Management, Steve Cohen’s Point72 Asset Management, and Dmitry Balyasny’s Balyasny Asset Management.

Let’s now review hedge fund activity in other stocks similar to World Fuel Services Corporation (NYSE:INT). We will take a look at Premier Inc (NASDAQ:PINC), SITE Centers Corp. (NYSE:SITC), CoreCivic, Inc. (NYSE:CXW), and Kosmos Energy Ltd (NYSE:KOS). This group of stocks’ market values match INT’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PINC 16 198348 0
SITC 15 53109 1
CXW 14 147007 0
KOS 24 216270 6
Average 17.25 153684 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $154 million. That figure was $150 million in INT’s case. Kosmos Energy Ltd (NYSE:KOS) is the most popular stock in this table. On the other hand CoreCivic, Inc. (NYSE:CXW) is the least popular one with only 14 bullish hedge fund positions. World Fuel Services Corporation (NYSE:INT) 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 INT as the stock returned 11.3% 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.