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 IQVIA Holdings, Inc. (NYSE:IQV).
Is IQVIA Holdings, Inc. (NYSE:IQV) a cheap investment now? The best stock pickers are becoming less confident. The number of bullish hedge fund positions were cut by 4 lately. Our calculations also showed that IQV isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). IQV was in 64 hedge funds’ portfolios at the end of December. There were 68 hedge funds in our database with IQV holdings at the end of the previous quarter.
Video: Click the image to 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 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 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.
Larry Robbins of Glenview Capital
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. Now we’re going to check out the new hedge fund action encompassing IQVIA Holdings, Inc. (NYSE:IQV).
What does smart money think about IQVIA Holdings, Inc. (NYSE:IQV)?
At Q4’s end, a total of 64 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards IQV over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Glenview Capital, managed by Larry Robbins, holds the number one position in IQVIA Holdings, Inc. (NYSE:IQV). Glenview Capital has a $579.7 million position in the stock, comprising 5.1% of its 13F portfolio. Sitting at the No. 2 spot is Lone Pine Capital, with a $476.2 million position; 2.5% of its 13F portfolio is allocated to the stock. Some other professional money managers with similar optimism contain Robert Pitts’s Steadfast Capital Management, D. E. Shaw’s D E Shaw and Dan Loeb’s Third Point. In terms of the portfolio weights assigned to each position Brahman Capital allocated the biggest weight to IQVIA Holdings, Inc. (NYSE:IQV), around 10.86% of its 13F portfolio. Cowbird Capital is also relatively very bullish on the stock, designating 9.03 percent of its 13F equity portfolio to IQV.
Seeing as IQVIA Holdings, Inc. (NYSE:IQV) has faced a decline in interest from the smart money, it’s easy to see that there were a few money managers that decided to sell off their entire stakes in the third quarter. It’s worth mentioning that Daniel Sundheim’s D1 Capital Partners sold off the biggest position of the “upper crust” of funds tracked by Insider Monkey, totaling an estimated $218 million in stock. Aaron Cowen’s fund, Suvretta Capital Management, also cut its stock, about $122.6 million worth. These moves are important to note, as total hedge fund interest was cut by 4 funds in the third quarter.
Let’s check out hedge fund activity in other stocks similar to IQVIA Holdings, Inc. (NYSE:IQV). We will take a look at Public Service Enterprise Group Incorporated (NYSE:PEG), HP Inc. (NYSE:HPQ), eBay Inc (NASDAQ:EBAY), and Atlassian Corporation Plc (NASDAQ:TEAM). This group of stocks’ market valuations resemble IQV’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PEG | 31 | 987064 | 11 |
| HPQ | 49 | 2547120 | 8 |
| EBAY | 51 | 3621065 | -8 |
| TEAM | 62 | 2649059 | 9 |
| Average | 48.25 | 2451077 | 5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 48.25 hedge funds with bullish positions and the average amount invested in these stocks was $2451 million. That figure was $3823 million in IQV’s case. Atlassian Corporation Plc (NASDAQ:TEAM) is the most popular stock in this table. On the other hand Public Service Enterprise Group Incorporated (NYSE:PEG) is the least popular one with only 31 bullish hedge fund positions. Compared to these stocks IQVIA Holdings, Inc. (NYSE:IQV) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks also gained 0.1% in 2020 through March 2nd and beat the market by 4.1 percentage points. Unfortunately IQV wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on IQV were disappointed as the stock returned -4.8% during the first two months of 2020 (through March 2nd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
Disclosure: None. This article was originally published at Insider Monkey.
