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Hedge Funds Were Selling ICON Public Limited Company (ICLR) Before The Coronavirus

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 835 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about ICON Public Limited Company (NASDAQ:ICLR) in this article.

Is ICON Public Limited Company (NASDAQ:ICLR) worth your attention right now? Hedge funds are taking a pessimistic view. The number of long hedge fund positions dropped by 5 recently. Our calculations also showed that ICLR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). ICLR was in 19 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 24 hedge funds in our database with ICLR holdings at the end of the previous quarter.

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 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 S&P 500 ETFs by 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 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.

David E. Shaw of D.E. Shaw

David E. Shaw of D.E. Shaw

We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a glance at the latest hedge fund action regarding ICON Public Limited Company (NASDAQ:ICLR).

What does smart money think about ICON Public Limited Company (NASDAQ:ICLR)?

At the end of the fourth quarter, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -21% from the third quarter of 2019. On the other hand, there were a total of 23 hedge funds with a bullish position in ICLR a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in ICON Public Limited Company (NASDAQ:ICLR) was held by Renaissance Technologies, which reported holding $404.2 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $61.7 million position. Other investors bullish on the company included Polar Capital, D E Shaw, and Partner Fund Management. In terms of the portfolio weights assigned to each position Partner Fund Management allocated the biggest weight to ICON Public Limited Company (NASDAQ:ICLR), around 1.59% of its 13F portfolio. McKinley Capital Management is also relatively very bullish on the stock, dishing out 1.13 percent of its 13F equity portfolio to ICLR.

Due to the fact that ICON Public Limited Company (NASDAQ:ICLR) has experienced falling interest from hedge fund managers, it’s safe to say that there exists a select few hedge funds who were dropping their entire stakes by the end of the third quarter. Interestingly, Michael Castor’s Sio Capital dropped the largest position of all the hedgies watched by Insider Monkey, comprising an estimated $3 million in stock. Qing Li’s fund, Sciencast Management, also dumped its stock, about $0.8 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 5 funds by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as ICON Public Limited Company (NASDAQ:ICLR) but similarly valued. These stocks are Hyatt Hotels Corporation (NYSE:H), National Retail Properties, Inc. (NYSE:NNN), US Foods Holding Corp. (NYSE:USFD), and Carlisle Companies, Inc. (NYSE:CSL). All of these stocks’ market caps match ICLR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
H 27 1152600 -4
NNN 23 276082 2
USFD 37 1278945 -9
CSL 26 406012 -8
Average 28.25 778410 -4.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.25 hedge funds with bullish positions and the average amount invested in these stocks was $778 million. That figure was $647 million in ICLR’s case. US Foods Holding Corp. (NYSE:USFD) is the most popular stock in this table. On the other hand National Retail Properties, Inc. (NYSE:NNN) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks ICON Public Limited Company (NASDAQ:ICLR) is even less popular than NNN. 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 lost 22.3% in 2020 through March 16th but managed to beat the market by 3.2 percentage points. A small number of hedge funds were also right about betting on ICLR, though not to the same extent, as the stock returned -24.5% during the same time period and outperformed the market as well.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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