Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average over the long-term. The top 15 S&P 500 stocks among hedge funds at the end of September 2018 returned an average of 1% through March 15th whereas the S&P 500 Index ETF lost 2.2% during the same period. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Intercontinental Exchange Inc (NYSE:ICE) from the perspective of those elite funds.
Intercontinental Exchange Inc (NYSE:ICE) investors should be aware of an increase in activity from the world’s largest hedge funds lately. Our calculations also showed that ICE isn’t among the 30 most popular stocks among hedge funds.
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 market by 32 percentage points since May 2014 through March 12, 2019 (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.
Let’s go over the fresh hedge fund action surrounding Intercontinental Exchange Inc (NYSE:ICE).
Hedge fund activity in Intercontinental Exchange Inc (NYSE:ICE)
At the end of the fourth quarter, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ICE over the last 14 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Cantillon Capital Management was the largest shareholder of Intercontinental Exchange Inc (NYSE:ICE), with a stake worth $352.8 million reported as of the end of September. Trailing Cantillon Capital Management was Eminence Capital, which amassed a stake valued at $352.6 million. Millennium Management, D E Shaw, and Iridian Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.
As one would reasonably expect, key hedge funds have been driving this bullishness. Junto Capital Management, managed by James Parsons, established the most outsized position in Intercontinental Exchange Inc (NYSE:ICE). Junto Capital Management had $76.2 million invested in the company at the end of the quarter. Jim Simons’s Renaissance Technologies also made a $46.6 million investment in the stock during the quarter. The following funds were also among the new ICE investors: Brandon Haley’s Holocene Advisors, Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital, and Eli Cohen’s Crescent Park Management.
Let’s also examine hedge fund activity in other stocks similar to Intercontinental Exchange Inc (NYSE:ICE). We will take a look at HCA Healthcare Inc (NYSE:HCA), S&P Global Inc. (NYSE:SPGI), Ecolab Inc. (NYSE:ECL), and Northrop Grumman Corporation (NYSE:NOC). This group of stocks’ market valuations are similar to ICE’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HCA | 56 | 2707875 | 10 |
| SPGI | 54 | 2920608 | 0 |
| ECL | 27 | 1832310 | 4 |
| NOC | 29 | 644842 | -4 |
| Average | 41.5 | 2026409 | 2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 41.5 hedge funds with bullish positions and the average amount invested in these stocks was $2026 million. That figure was $2693 million in ICE’s case. HCA Healthcare Inc (NYSE:HCA) is the most popular stock in this table. On the other hand Ecolab Inc. (NYSE:ECL) is the least popular one with only 27 bullish hedge fund positions. Intercontinental Exchange Inc (NYSE:ICE) 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 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately ICE wasn’t in this group. Hedge funds that bet on ICE were disappointed as the stock lost 0.6% and underperformed the market by a large margin. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
