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Did Hedge Funds Make The Right Call On Invesco Ltd. (IVZ)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Invesco Ltd. (NYSE:IVZ) and determine whether the smart money was really smart about this stock.

Invesco Ltd. (NYSE:IVZ) investors should be aware of an increase in hedge fund interest of late. Our calculations also showed that IVZ 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

TUDOR INVESTMENT CORP

Paul Tudor Jones of Tudor Investment Corp

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. With all of this in mind let’s take a look at the new hedge fund action regarding Invesco Ltd. (NYSE:IVZ).

How have hedgies been trading Invesco Ltd. (NYSE:IVZ)?

Heading into the second quarter of 2020, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the fourth quarter of 2019. By comparison, 24 hedge funds held shares or bullish call options in IVZ a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Pzena Investment Management held the most valuable stake in Invesco Ltd. (NYSE:IVZ), which was worth $35.7 million at the end of the third quarter. On the second spot was Contrarius Investment Management which amassed $27.7 million worth of shares. Millennium Management, Marshall Wace LLP, and Arrowstreet Capital 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 Contrarius Investment Management allocated the biggest weight to Invesco Ltd. (NYSE:IVZ), around 3.55% of its 13F portfolio. Neo Ivy Capital is also relatively very bullish on the stock, setting aside 0.38 percent of its 13F equity portfolio to IVZ.

Consequently, key money managers were leading the bulls’ herd. Contrarius Investment Management, managed by Stephen Mildenhall, established the most outsized position in Invesco Ltd. (NYSE:IVZ). Contrarius Investment Management had $27.7 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also made a $2 million investment in the stock during the quarter. The other funds with brand new IVZ positions are Bruce Kovner’s Caxton Associates LP, Peter Muller’s PDT Partners, and Renee Yao’s Neo Ivy Capital.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Invesco Ltd. (NYSE:IVZ) but similarly valued. We will take a look at ICU Medical, Inc. (NASDAQ:ICUI), United Therapeutics Corporation (NASDAQ:UTHR), Diamondback Energy Inc (NASDAQ:FANG), and Lincoln Electric Holdings, Inc. (NASDAQ:LECO). This group of stocks’ market valuations resemble IVZ’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ICUI 25 376778 8
UTHR 31 1290986 -5
FANG 31 240887 -13
LECO 19 157727 3
Average 26.5 516595 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.5 hedge funds with bullish positions and the average amount invested in these stocks was $517 million. That figure was $115 million in IVZ’s case. United Therapeutics Corporation (NASDAQ:UTHR) is the most popular stock in this table. On the other hand Lincoln Electric Holdings, Inc. (NASDAQ:LECO) is the least popular one with only 19 bullish hedge fund positions. Invesco Ltd. (NYSE:IVZ) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on IVZ, though not to the same extent, as the stock returned 20.9% during the second quarter and outperformed the market.

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