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. 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 Intuit Inc. (NASDAQ:INTU) in this article.
Is Intuit Inc. (NASDAQ:INTU) worth your attention right now? Prominent investors are in a bearish mood. The number of bullish hedge fund bets were cut by 1 recently. Our calculations also showed that INTU isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
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 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.
Noam Gottesman of GLG Partners
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. With all of this in mind let’s check out the new hedge fund action surrounding Intuit Inc. (NASDAQ:INTU).
How are hedge funds trading Intuit Inc. (NASDAQ:INTU)?
Heading into the first quarter of 2020, a total of 54 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -2% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in INTU over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, AQR Capital Management held the most valuable stake in Intuit Inc. (NASDAQ:INTU), which was worth $475.6 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $426.3 million worth of shares. GLG Partners, Echo Street Capital Management, and Adage 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 Blue Whale Capital allocated the biggest weight to Intuit Inc. (NASDAQ:INTU), around 6.94% of its 13F portfolio. Valley Forge Capital is also relatively very bullish on the stock, dishing out 4.82 percent of its 13F equity portfolio to INTU.
Since Intuit Inc. (NASDAQ:INTU) has witnessed bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of fund managers who sold off their positions entirely heading into Q4. At the top of the heap, John Overdeck and David Siegel’s Two Sigma Advisors sold off the biggest investment of all the hedgies tracked by Insider Monkey, worth close to $157.7 million in stock. James Parsons’s fund, Junto Capital Management, also sold off its stock, about $39.7 million worth. These moves are interesting, as total hedge fund interest was cut by 1 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks similar to Intuit Inc. (NASDAQ:INTU). These stocks are Vale SA (NYSE:VALE), The Blackstone Group L.P. (NYSE:BX), T-Mobile US, Inc. (NASDAQ:TMUS), and The Southern Company (NYSE:SO). This group of stocks’ market values are similar to INTU’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VALE | 26 | 1762450 | -3 |
| BX | 47 | 1192894 | 5 |
| TMUS | 61 | 1396533 | -3 |
| SO | 30 | 866429 | -3 |
| Average | 41 | 1304577 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 41 hedge funds with bullish positions and the average amount invested in these stocks was $1305 million. That figure was $1701 million in INTU’s case. T-Mobile US, Inc. (NASDAQ:TMUS) is the most popular stock in this table. On the other hand Vale SA (NYSE:VALE) is the least popular one with only 26 bullish hedge fund positions. Intuit Inc. (NASDAQ:INTU) is not the most popular stock in this group but hedge fund interest is still above average. 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 11.7% in 2020 through March 11th but still beat the market by 3.1 percentage points. Hedge funds were also right about betting on INTU as the stock returned -0.1% during the first quarter (through March 11th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
