How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Interactive Brokers Group, Inc. (NASDAQ:IBKR).
Is Interactive Brokers Group, Inc. (NASDAQ:IBKR) the right pick for your portfolio? Investors who are in the know were getting more bullish. The number of long hedge fund positions improved by 3 in recent months. Interactive Brokers Group, Inc. (NASDAQ:IBKR) was in 31 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 37. Our calculations also showed that IBKR isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
In the eyes of most shareholders, hedge funds are assumed to be worthless, old investment vehicles of the past. While there are more than 8000 funds in operation at present, We hone in on the upper echelon of this club, approximately 850 funds. These money managers have their hands on the lion’s share of the smart money’s total capital, and by observing their unrivaled picks, Insider Monkey has determined many investment strategies that have historically beaten the broader indices. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .
William Von Mueffling of Cantillon Capital Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to view the fresh hedge fund action regarding Interactive Brokers Group, Inc. (NASDAQ:IBKR).
Do Hedge Funds Think IBKR Is A Good Stock To Buy Now?
At first quarter’s end, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the previous quarter. On the other hand, there were a total of 22 hedge funds with a bullish position in IBKR 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.
More specifically, Bares Capital Management was the largest shareholder of Interactive Brokers Group, Inc. (NASDAQ:IBKR), with a stake worth $397.3 million reported as of the end of March. Trailing Bares Capital Management was Cantillon Capital Management, which amassed a stake valued at $175.1 million. Select Equity Group, Ancient Art (Teton Capital), and Samlyn 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 Ancient Art (Teton Capital) allocated the biggest weight to Interactive Brokers Group, Inc. (NASDAQ:IBKR), around 12.67% of its 13F portfolio. Owls Nest Partners is also relatively very bullish on the stock, dishing out 9.82 percent of its 13F equity portfolio to IBKR.
With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Millennium Management, managed by Israel Englander, initiated the largest position in Interactive Brokers Group, Inc. (NASDAQ:IBKR). Millennium Management had $27.8 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also made a $7.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Tudor Jones’s Tudor Investment Corp, Donald Sussman’s Paloma Partners, and Greg Eisner’s Engineers Gate Manager.
Let’s now review hedge fund activity in other stocks similar to Interactive Brokers Group, Inc. (NASDAQ:IBKR). We will take a look at Public Service Enterprise Group Incorporated (NYSE:PEG), Chunghwa Telecom Co., Ltd (NYSE:CHT), SBA Communications Corporation (NASDAQ:SBAC), Skyworks Solutions Inc (NASDAQ:SWKS), Fortinet Inc (NASDAQ:FTNT), Welltower Inc. (NYSE:WELL), and Eversource Energy (NYSE:ES). This group of stocks’ market caps are similar to IBKR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PEG | 24 | 287434 | -4 |
| CHT | 3 | 153173 | -2 |
| SBAC | 38 | 2090468 | -5 |
| SWKS | 33 | 765774 | -8 |
| FTNT | 23 | 906297 | -9 |
| WELL | 21 | 326506 | -5 |
| ES | 24 | 421208 | 0 |
| Average | 23.7 | 707266 | -4.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.7 hedge funds with bullish positions and the average amount invested in these stocks was $707 million. That figure was $1457 million in IBKR’s case. SBA Communications Corporation (NASDAQ:SBAC) is the most popular stock in this table. On the other hand Chunghwa Telecom Co., Ltd (NYSE:CHT) is the least popular one with only 3 bullish hedge fund positions. Interactive Brokers Group, Inc. (NASDAQ:IBKR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for IBKR is 73.1. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.8% in 2021 through July 2nd and beat the market again by 6 percentage points. Unfortunately IBKR wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on IBKR were disappointed as the stock returned -10.1% since the end of March (through 7/2) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow Interactive Brokers Group Inc. (NASDAQ:IBKR)
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Disclosure: None. This article was originally published at Insider Monkey.
