Hedge Funds Never Really Liked Equifax Inc. (EFX)

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 first 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 4.5 years and analyze what the smart money thinks of Equifax Inc. (NYSE:EFX) based on that data.

Hedge fund interest in Equifax Inc. (NYSE:EFX) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Fox Corporation (NASDAQ:FOXA), Vulcan Materials Company (NYSE:VMC), and Boston Properties, Inc. (NYSE:BXP) to gather more data points. Our calculations also showed that EFX isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 51 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

David Blood

David Blood of Generation Investment Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a look at the latest hedge fund action regarding Equifax Inc. (NYSE:EFX).

How are hedge funds trading Equifax Inc. (NYSE:EFX)?

Heading into the second quarter of 2020, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards EFX over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Lone Pine Capital, holds the most valuable position in Equifax Inc. (NYSE:EFX). Lone Pine Capital has a $378.8 million position in the stock, comprising 2.2% of its 13F portfolio. The second most bullish fund manager is William von Mueffling of Cantillon Capital Management, with a $274.1 million position; the fund has 3% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions comprise David Blood and Al Gore’s Generation Investment Management, Gabriel Plotkin’s Melvin Capital Management and Greg Poole’s Echo Street Capital Management. In terms of the portfolio weights assigned to each position Harbor Spring Capital allocated the biggest weight to Equifax Inc. (NYSE:EFX), around 4.04% of its 13F portfolio. Cantillon Capital Management is also relatively very bullish on the stock, dishing out 3.03 percent of its 13F equity portfolio to EFX.

Due to the fact that Equifax Inc. (NYSE:EFX) has witnessed a decline in interest from hedge fund managers, it’s safe to say that there is a sect of funds that slashed their full holdings heading into Q4. It’s worth mentioning that Robert Pohly’s Samlyn Capital cut the largest position of the 750 funds monitored by Insider Monkey, comprising an estimated $62 million in stock, and John Brennan’s Sirios Capital Management was right behind this move, as the fund dumped about $27.1 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Equifax Inc. (NYSE:EFX) but similarly valued. We will take a look at Fox Corporation (NASDAQ:FOXA), Vulcan Materials Company (NYSE:VMC), Boston Properties, Inc. (NYSE:BXP), and Garmin Ltd. (NASDAQ:GRMN). This group of stocks’ market caps resemble EFX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FOXA 38 1563564 1
VMC 49 1119317 -3
BXP 29 185266 9
GRMN 27 394058 1
Average 35.75 815551 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 35.75 hedge funds with bullish positions and the average amount invested in these stocks was $816 million. That figure was $1301 million in EFX’s case. Vulcan Materials Company (NYSE:VMC) is the most popular stock in this table. On the other hand Garmin Ltd. (NASDAQ:GRMN) is the least popular one with only 27 bullish hedge fund positions. Equifax Inc. (NYSE:EFX) is not the least popular stock in this group but hedge fund interest is still below average. 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 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on EFX as the stock returned 28.9% during the second quarter and outperformed the market by an even larger margin.

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