Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed over the past few years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that hedge funds do have great stock picking skills, so let’s take a glance at the smart money sentiment towards IHS Markit Ltd (NASDAQ:INFO).
IHS Markit Ltd (NASDAQ:INFO) was in 30 hedge funds’ portfolios at the end of the third quarter of 2016. INFO investors should pay attention to an increase in hedge fund interest of late. There were 19 hedge funds in our database with INFO positions at the end of the previous quarter. At the end of this article we will also compare INFO to other stocks including Arthur J. Gallagher & Co. (NYSE:AJG), Tractor Supply Company (NASDAQ:TSCO), and Nordstrom, Inc. (NYSE:JWN) to get a better sense of its popularity.
We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
How have hedgies been trading IHS Markit Ltd (NASDAQ:INFO)?
At Q3’s end, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a 58% surge from one quarter earlier. The graph below displays the number of hedge funds with bullish position in INFO over the last 5 quarters, which shows a solid uptrend. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, John Griffin’s Blue Ridge Capital has the largest position in IHS Markit Ltd (NASDAQ:INFO), worth close to $218.7 million, accounting for 2.6% of its total 13F portfolio. Coming in second is Brahman Capital, led by Peter Adam Hochfelder, which holds a $214.6 million position; the fund has 7.5% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish contain Doug Silverman and Alexander Klabin’s Senator Investment Group, Farallon Capital, and Robert Joseph Caruso’s Select Equity Group. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Consequently, key money managers were breaking ground themselves. Blue Ridge Capital established the most outsized position in IHS Markit Ltd (NASDAQ:INFO). Select Equity Group also made a $139.7 million investment in the stock during the quarter. The following funds were also among the new INFO investors: James Crichton’s Hitchwood Capital Management, David Thomas’ Atalan Capital, and Clint Carlson’s Carlson Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as IHS Markit Ltd (NASDAQ:INFO) but similarly valued. These stocks are Arthur J. Gallagher & Co. (NYSE:AJG), Tractor Supply Company (NASDAQ:TSCO), Nordstrom, Inc. (NYSE:JWN), and Synopsys, Inc. (NASDAQ:SNPS). This group of stocks’ market valuations match INFO’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $315 million. That figure was $1.38 billion in INFO’s case. Nordstrom, Inc. (NYSE:JWN) is the most popular stock in this table. On the other hand Arthur J. Gallagher & Co. (NYSE:AJG) is the least popular one with only 12 bullish hedge fund positions. IHS Markit Ltd (NASDAQ:INFO) is tied as the most popular stock in this group and has a lot more money invested in it than any of the other stocks. This is a positive signal, as we’d rather spend our time researching stocks that hedge funds are pouring money into and piling into recently. In this regard INFO might be a good candidate to consider taking a long position in.