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Hedge Funds Picked The Wrong Time To Bet On ING Groep N.V. (ING)

Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. 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 fourth 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 years and analyze what the smart money thinks of ING Groep N.V. (NYSE:ING) based on that data.

Is ING Groep N.V. (NYSE:ING) a buy right now? Hedge funds are getting more bullish. The number of bullish hedge fund bets went up by 4 recently. Our calculations also showed that ING isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 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.

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 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ken Fisher FISHER ASSET MANAGEMENT

Ken Fisher of Fisher Asset Management

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. Keeping this in mind let’s review the new hedge fund action regarding ING Groep N.V. (NYSE:ING).

How are hedge funds trading ING Groep N.V. (NYSE:ING)?

Heading into the first quarter of 2020, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 40% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards ING over the last 18 quarters. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

Is ING A Good Stock To Buy?

The largest stake in ING Groep N.V. (NYSE:ING) was held by Fisher Asset Management, which reported holding $601.5 million worth of stock at the end of September. It was followed by Orbis Investment Management with a $20.5 million position. Other investors bullish on the company included Citadel Investment Group, Two Sigma Advisors, and Galibier Capital Management. In terms of the portfolio weights assigned to each position Fisher Asset Management allocated the biggest weight to ING Groep N.V. (NYSE:ING), around 0.61% of its 13F portfolio. Galibier Capital Management is also relatively very bullish on the stock, dishing out 0.48 percent of its 13F equity portfolio to ING.

As aggregate interest increased, some big names have been driving this bullishness. Two Sigma Advisors, managed by John Overdeck and David Siegel, initiated the most outsized position in ING Groep N.V. (NYSE:ING). Two Sigma Advisors had $2.3 million invested in the company at the end of the quarter. Richard Mashaal’s Rima Senvest Management also made a $1.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Claes Fornell’s CSat Investment Advisory, Michael Gelband’s ExodusPoint Capital, and Donald Sussman’s Paloma Partners.

Let’s check out hedge fund activity in other stocks similar to ING Groep N.V. (NYSE:ING). We will take a look at Metlife Inc (NYSE:MET), American Electric Power Company, Inc. (NYSE:AEP), Emerson Electric Co. (NYSE:EMR), and The Bank of New York Mellon Corporation (NYSE:BK). This group of stocks’ market valuations match ING’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MET 38 2371511 -1
AEP 34 1687802 -1
EMR 41 1165094 2
BK 58 6711257 3
Average 42.75 2983916 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 42.75 hedge funds with bullish positions and the average amount invested in these stocks was $2984 million. That figure was $635 million in ING’s case. The Bank of New York Mellon Corporation (NYSE:BK) is the most popular stock in this table. On the other hand American Electric Power Company, Inc. (NYSE:AEP) is the least popular one with only 34 bullish hedge fund positions. Compared to these stocks ING Groep N.V. (NYSE:ING) is even less popular than AEP. Hedge funds dodged a bullet by taking a bearish stance towards ING. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but managed to beat the market by 3.1 percentage points. Unfortunately ING wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); ING investors were disappointed as the stock returned -42.4% during the same time period 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 so far in Q1.

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

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