Is IAC/InterActiveCorp (NASDAQ:IAC) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before doing days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is IAC/InterActiveCorp (NASDAQ:IAC) going to take off soon? The smart money is getting less optimistic. The number of long hedge fund positions fell by 1 lately. Our calculations also showed that IAC isn’t among the 30 most popular stocks among hedge funds. IAC was in 50 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 51 hedge funds in our database with IAC 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 market by 32 percentage points since May 2014 through March 12, 2019 (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.
Let’s analyze the latest hedge fund action encompassing IAC/InterActiveCorp (NASDAQ:IAC).
What have hedge funds been doing with IAC/InterActiveCorp (NASDAQ:IAC)?
At Q4’s end, a total of 50 of the hedge funds tracked by Insider Monkey were long this stock, a change of -2% from the second quarter of 2018. On the other hand, there were a total of 51 hedge funds with a bullish position in IAC a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
Among these funds, AQR Capital Management held the most valuable stake in IAC/InterActiveCorp (NASDAQ:IAC), which was worth $251.3 million at the end of the third quarter. On the second spot was Marcato Capital Management which amassed $179.7 million worth of shares. Moreover, Aristeia Capital, Luxor Capital Group, and Millennium Management were also bullish on IAC/InterActiveCorp (NASDAQ:IAC), allocating a large percentage of their portfolios to this stock.
Due to the fact that IAC/InterActiveCorp (NASDAQ:IAC) has faced declining sentiment from the smart money, it’s easy to see that there exists a select few hedgies who sold off their positions entirely in the third quarter. Interestingly, David Einhorn’s Greenlight Capital dropped the largest stake of all the hedgies tracked by Insider Monkey, valued at close to $94.3 million in stock, and Doug Silverman and Alexander Klabin’s Senator Investment Group was right behind this move, as the fund dumped about $92.1 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 1 funds in the third quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as IAC/InterActiveCorp (NASDAQ:IAC) but similarly valued. These stocks are CGI Inc. (NYSE:GIB), Diamondback Energy Inc (NASDAQ:FANG), Cheniere Energy, Inc. (NYSEAMEX:LNG), and Magna International Inc. (NYSE:MGA). This group of stocks’ market valuations are closest to IAC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GIB | 17 | 362855 | 2 |
| FANG | 44 | 2134858 | 7 |
| LNG | 46 | 5003221 | 4 |
| MGA | 22 | 283606 | 2 |
| Average | 32.25 | 1946135 | 3.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.25 hedge funds with bullish positions and the average amount invested in these stocks was $1946 million. That figure was $1928 million in IAC’s case. Cheniere Energy, Inc. (NYSEAMEX:LNG) is the most popular stock in this table. On the other hand CGI Inc. (NYSE:GIB) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks IAC/InterActiveCorp (NASDAQ:IAC) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Hedge funds were also right about betting on IAC, though not to the same extent, as the stock returned 14.8% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
