At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Inter Parfums, Inc. (NASDAQ:IPAR) at the end of the first quarter and determine whether the smart money was really smart about this stock.
Is Inter Parfums, Inc. (NASDAQ:IPAR) a good investment now? The smart money was getting less optimistic. The number of bullish hedge fund positions dropped by 2 recently. Our calculations also showed that IPAR 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). IPAR was in 13 hedge funds’ portfolios at the end of March. There were 15 hedge funds in our database with IPAR positions at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most stock holders, hedge funds are assumed to be underperforming, outdated financial tools of yesteryear. While there are greater than 8000 funds with their doors open at the moment, Our researchers choose to focus on the bigwigs of this group, about 850 funds. These hedge fund managers control bulk of all hedge funds’ total asset base, and by shadowing their best equity investments, Insider Monkey has come up with many investment strategies that have historically defeated the broader indices. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 10 most profitable companies in the world to identify emerging companies that are likely to deliver 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a look at the latest hedge fund action regarding Inter Parfums, Inc. (NASDAQ:IPAR).
Hedge fund activity in Inter Parfums, Inc. (NASDAQ:IPAR)
Heading into the second quarter of 2020, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from the fourth quarter of 2019. On the other hand, there were a total of 22 hedge funds with a bullish position in IPAR a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Royce & Associates held the most valuable stake in Inter Parfums, Inc. (NASDAQ:IPAR), which was worth $23.5 million at the end of the third quarter. On the second spot was Horizon Asset Management which amassed $9.2 million worth of shares. Millennium Management, Citadel Investment Group, and Winton 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 Zebra Capital Management allocated the biggest weight to Inter Parfums, Inc. (NASDAQ:IPAR), around 0.71% of its 13F portfolio. Horizon Asset Management is also relatively very bullish on the stock, earmarking 0.41 percent of its 13F equity portfolio to IPAR.
Due to the fact that Inter Parfums, Inc. (NASDAQ:IPAR) has experienced bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there were a few money managers who sold off their full holdings in the first quarter. It’s worth mentioning that Richard Driehaus’s Driehaus Capital said goodbye to the largest investment of the “upper crust” of funds monitored by Insider Monkey, valued at about $2.4 million in stock. Minhua Zhang’s fund, Weld Capital Management, also dropped its stock, about $0.9 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 2 funds in the first quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Inter Parfums, Inc. (NASDAQ:IPAR) but similarly valued. These stocks are Patterson Companies, Inc. (NASDAQ:PDCO), Inspire Medical Systems, Inc. (NYSE:INSP), AeroVironment, Inc. (NASDAQ:AVAV), and Theravance Biopharma Inc (NASDAQ:TBPH). This group of stocks’ market values resemble IPAR’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $194 million. That figure was $46 million in IPAR’s case. Inspire Medical Systems, Inc. (NYSE:INSP) is the most popular stock in this table. On the other hand AeroVironment, Inc. (NASDAQ:AVAV) is the least popular one with only 10 bullish hedge fund positions. Inter Parfums, Inc. (NASDAQ:IPAR) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 13.3% in 2020 through June 25th and surpassed the market by 16.8 percentage points. Unfortunately IPAR wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); IPAR investors were disappointed as the stock returned -2.4% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.