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Hedge Funds Are Piling Into Interactive Brokers Group, Inc. (IBKR)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Interactive Brokers Group, Inc. (NASDAQ:IBKR) based on that data and determine whether they were really smart about the stock.

Is Interactive Brokers Group, Inc. (NASDAQ:IBKR) a buy right now? Investors who are in the know were in an optimistic mood. The number of bullish hedge fund bets improved by 10 lately. Interactive Brokers Group, Inc. (NASDAQ:IBKR) was in 32 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 37. Our calculations also showed that IBKR isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 56 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.

William Von Mueffling - Cantillon Capital Management

William Von Mueffling of Cantillon Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. With all of this in mind we’re going to analyze the new hedge fund action encompassing Interactive Brokers Group, Inc. (NASDAQ:IBKR).

How have hedgies been trading Interactive Brokers Group, Inc. (NASDAQ:IBKR)?

At Q2’s end, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of 45% from one quarter earlier. On the other hand, there were a total of 24 hedge funds with a bullish position in IBKR a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Bares Capital Management held the most valuable stake in Interactive Brokers Group, Inc. (NASDAQ:IBKR), which was worth $238.6 million at the end of the third quarter. On the second spot was Cantillon Capital Management which amassed $105 million worth of shares. Select Equity Group, Ancient Art (Teton Capital), and Bronte 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 14.51% of its 13F portfolio. Bronte Capital is also relatively very bullish on the stock, dishing out 8.9 percent of its 13F equity portfolio to IBKR.

Consequently, some big names have jumped into Interactive Brokers Group, Inc. (NASDAQ:IBKR) headfirst. Ariel Investments, managed by John W. Rogers, initiated the largest position in Interactive Brokers Group, Inc. (NASDAQ:IBKR). Ariel Investments had $11.5 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $9.9 million position during the quarter. The following funds were also among the new IBKR investors: Peter S. Park’s Park West Asset Management, Greg Eisner’s Engineers Gate Manager, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Interactive Brokers Group, Inc. (NASDAQ:IBKR) but similarly valued. These stocks are Coca-Cola European Partners plc (NYSE:CCEP), Conagra Brands, Inc. (NYSE:CAG), iQIYI, Inc. (NASDAQ:IQ), Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY), Cheniere Energy Partners LP (NYSE:CQP), Teleflex Incorporated (NYSE:TFX), and Freeport-McMoRan Inc. (NYSE:FCX). This group of stocks’ market values are closest to IBKR’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CCEP 27 464657 5
CAG 35 614220 5
IQ 17 1283437 -11
ALNY 38 982898 4
CQP 3 9442 0
TFX 28 651313 -4
FCX 53 1222479 11
Average 28.7 746921 1.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.7 hedge funds with bullish positions and the average amount invested in these stocks was $747 million. That figure was $696 million in IBKR’s case. Freeport-McMoRan Inc. (NYSE:FCX) is the most popular stock in this table. On the other hand Cheniere Energy Partners LP (NYSE:CQP) 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 64.9. 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. 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 23.8% in 2020 through September 14th and still beat the market by 17.6 percentage points. Hedge funds were also right about betting on IBKR as the stock returned 14.3% during Q3 (through September 14th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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