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Did Hedge Funds Make The Right Call On The Interpublic Group of Companies, Inc. (IPG)?

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 The Interpublic Group of Companies, Inc. (NYSE:IPG) and determine whether the smart money was really smart about this stock.

The Interpublic Group of Companies, Inc. (NYSE:IPG) was in 21 hedge funds’ portfolios at the end of March. IPG investors should be aware of a decrease in support from the world’s most elite money managers lately. There were 26 hedge funds in our database with IPG positions at the end of the previous quarter. Our calculations also showed that IPG 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.

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 monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 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.

John Rogers Ariel Investments

John Rogers of Ariel Investments

At Insider Monkey we scour multiple sources to uncover the next great investment idea. 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 under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind let’s take a look at the fresh hedge fund action surrounding The Interpublic Group of Companies, Inc. (NYSE:IPG).

How have hedgies been trading The Interpublic Group of Companies, Inc. (NYSE:IPG)?

At Q1’s end, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of -19% from the previous quarter. On the other hand, there were a total of 26 hedge funds with a bullish position in IPG a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Pzena Investment Management was the largest shareholder of The Interpublic Group of Companies, Inc. (NYSE:IPG), with a stake worth $244.4 million reported as of the end of September. Trailing Pzena Investment Management was Ariel Investments, which amassed a stake valued at $149.9 million. Citadel Investment Group, GAMCO Investors, and AQR 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 Ariel Investments allocated the biggest weight to The Interpublic Group of Companies, Inc. (NYSE:IPG), around 2.63% of its 13F portfolio. Pzena Investment Management is also relatively very bullish on the stock, earmarking 1.85 percent of its 13F equity portfolio to IPG.

Since The Interpublic Group of Companies, Inc. (NYSE:IPG) has experienced a decline in interest from hedge fund managers, it’s safe to say that there were a few hedgies that slashed their entire stakes heading into Q4. It’s worth mentioning that Israel Englander’s Millennium Management cut the biggest position of all the hedgies watched by Insider Monkey, totaling close to $8.2 million in stock. Renaissance Technologies, also cut its stock, about $4.7 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 5 funds heading into Q4.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as The Interpublic Group of Companies, Inc. (NYSE:IPG) but similarly valued. We will take a look at Charles River Laboratories International Inc. (NYSE:CRL), Hubbell Incorporated (NYSE:HUBB), Assurant, Inc. (NYSE:AIZ), and Alteryx, Inc. (NYSE:AYX). All of these stocks’ market caps match IPG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CRL 36 862557 4
HUBB 15 272338 -8
AIZ 33 782609 8
AYX 43 1019690 -1
Average 31.75 734299 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.75 hedge funds with bullish positions and the average amount invested in these stocks was $734 million. That figure was $594 million in IPG’s case. Alteryx, Inc. (NYSE:AYX) is the most popular stock in this table. On the other hand Hubbell Incorporated (NYSE:HUBB) is the least popular one with only 15 bullish hedge fund positions. The Interpublic Group of Companies, Inc. (NYSE:IPG) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 18.6% in 2020 through July 27th and surpassed the market by 17.1 percentage points. Unfortunately IPG wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); IPG investors were disappointed as the stock returned 16.3% since Q1 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 most of these stocks already outperformed the market in 2020.

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