Did Hedge Funds Make The Right Call On International Seaways, Inc. (INSW) ?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards International Seaways, Inc. (NYSE:INSW) and determine whether hedge funds skillfully traded this stock.

International Seaways, Inc. (NYSE:INSW) has experienced an increase in activity from the world’s largest hedge funds recently. Our calculations also showed that INSW isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 58 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.

Nathaniel August - Mangrove Partners

Nathaniel August of Mangrove Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s check out the latest hedge fund action surrounding International Seaways, Inc. (NYSE:INSW).

How have hedgies been trading International Seaways, Inc. (NYSE:INSW)?

At Q1’s end, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of 23% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in INSW over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

More specifically, Cyrus Capital Partners was the largest shareholder of International Seaways, Inc. (NYSE:INSW), with a stake worth $95.6 million reported as of the end of September. Trailing Cyrus Capital Partners was Mangrove Partners, which amassed a stake valued at $18 million. Yost Capital Management, Hosking Partners, and Rubric Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Cyrus Capital Partners allocated the biggest weight to International Seaways, Inc. (NYSE:INSW), around 35.1% of its 13F portfolio. Yost Capital Management is also relatively very bullish on the stock, setting aside 9.41 percent of its 13F equity portfolio to INSW.

With a general bullishness amongst the heavyweights, some big names were leading the bulls’ herd. Hawk Ridge Management, managed by David Brown, initiated the most outsized position in International Seaways, Inc. (NYSE:INSW). Hawk Ridge Management had $3.5 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $3.3 million position during the quarter. The following funds were also among the new INSW investors: Mark Coe’s Intrinsic Edge Capital, Gary Claar’s Claar Advisors, and Nick Thakore’s Diametric Capital.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as International Seaways, Inc. (NYSE:INSW) but similarly valued. These stocks are Talend S.A. (NASDAQ:TLND), Third Point Reinsurance Ltd (NYSE:TPRE), Novavax, Inc. (NASDAQ:NVAX), and INTL Fcstone Inc (NASDAQ:INTL). This group of stocks’ market values are similar to INSW’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TLND 29 332515 5
TPRE 17 40013 -3
NVAX 4 11335 1
INTL 10 83773 1
Average 15 116909 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $117 million. That figure was $170 million in INSW’s case. Talend S.A. (NASDAQ:TLND) is the most popular stock in this table. On the other hand Novavax, Inc. (NASDAQ:NVAX) is the least popular one with only 4 bullish hedge fund positions. International Seaways, Inc. (NYSE:INSW) is not the most popular stock in this group but hedge fund interest is still above average. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately INSW wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on INSW were disappointed as the stock returned -31.4% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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