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Hedge Funds Cashing Out Of ICICI Bank Limited (IBN)

At Insider Monkey, we pore over the filings of nearly 750 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not ICICI Bank Limited (NYSE:IBN) makes for a good investment right now.

Is ICICI Bank Limited (NYSE:IBN) worth your attention right now? Investors who are in the know are taking a bearish view. The number of bullish hedge fund positions were cut by 3 in recent months. Our calculations also showed that IBN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Howard Marks OAKTREE CAPITAL MANAGEMENT

Howard Marks of Oaktree Capital Management

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to analyze the key hedge fund action surrounding ICICI Bank Limited (NYSE:IBN).

How have hedgies been trading ICICI Bank Limited (NYSE:IBN)?

At Q3’s end, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from one quarter earlier. On the other hand, there were a total of 22 hedge funds with a bullish position in IBN a year ago. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

No of Hedge Funds with IBN Positions

Among these funds, Samlyn Capital held the most valuable stake in ICICI Bank Limited (NYSE:IBN), which was worth $132.2 million at the end of the third quarter. On the second spot was Oaktree Capital Management which amassed $101.9 million worth of shares. Driehaus Capital, LMR Partners, and Two Creeks 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 Dalton Investments allocated the biggest weight to ICICI Bank Limited (NYSE:IBN), around 16.13% of its portfolio. Think Investments is also relatively very bullish on the stock, dishing out 13.84 percent of its 13F equity portfolio to IBN.

Judging by the fact that ICICI Bank Limited (NYSE:IBN) has experienced falling interest from hedge fund managers, it’s easy to see that there is a sect of money managers that decided to sell off their positions entirely last quarter. Interestingly, Ram Seshan Venkateswaran’s Vernier Capital cut the biggest position of all the hedgies followed by Insider Monkey, comprising an estimated $8.4 million in stock. Charles Clough’s fund, Clough Capital Partners, also sold off its stock, about $5.2 million worth. These moves are interesting, as aggregate hedge fund interest fell by 3 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to ICICI Bank Limited (NYSE:IBN). These stocks are Mizuho Financial Group Inc. (NYSE:MFG), Workday Inc (NASDAQ:WDAY), Moody’s Corporation (NYSE:MCO), and AFLAC Incorporated (NYSE:AFL). This group of stocks’ market values are similar to IBN’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MFG 4 14381 -2
WDAY 39 1240146 -2
MCO 48 7835478 9
AFL 27 528066 4
Average 29.5 2404518 2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.5 hedge funds with bullish positions and the average amount invested in these stocks was $2405 million. That figure was $849 million in IBN’s case. Moody’s Corporation (NYSE:MCO) is the most popular stock in this table. On the other hand Mizuho Financial Group Inc. (NYSE:MFG) is the least popular one with only 4 bullish hedge fund positions. ICICI Bank Limited (NYSE:IBN) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on IBN as the stock returned 15.7% during the first two months of Q4 and outperformed the market by an even larger margin.

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

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