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Is IES Holdings, Inc. (IESC) Going to Burn These Hedge Funds?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards IES Holdings, Inc. (NASDAQ:IESC) and determine whether hedge funds skillfully traded this stock.

IES Holdings, Inc. (NASDAQ:IESC) has seen a decrease in enthusiasm from smart money recently. Our calculations also showed that IESC 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).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the 21st century investor’s toolkit there are several signals investors put to use to assess stocks. A pair of the most useful signals are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the top picks of the top fund managers can trounce the S&P 500 by a significant amount (see the details here).

Chuck Royce

Chuck Royce of Royce & Associates

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. 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 peek at the new hedge fund action surrounding IES Holdings, Inc. (NASDAQ:IESC).

How are hedge funds trading IES Holdings, Inc. (NASDAQ:IESC)?

At Q1’s end, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from the fourth quarter of 2019. On the other hand, there were a total of 5 hedge funds with a bullish position in IESC a year ago. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Among these funds, Tontine Asset Management held the most valuable stake in IES Holdings, Inc. (NASDAQ:IESC), which was worth $210.9 million at the end of the third quarter. On the second spot was Royce & Associates which amassed $14.8 million worth of shares. Renaissance Technologies, AltraVue Capital, and Arrowstreet Capital 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 Tontine Asset Management allocated the biggest weight to IES Holdings, Inc. (NASDAQ:IESC), around 64.62% of its 13F portfolio. AltraVue Capital is also relatively very bullish on the stock, designating 2.12 percent of its 13F equity portfolio to IESC.

Because IES Holdings, Inc. (NASDAQ:IESC) has experienced declining sentiment from the entirety of the hedge funds we track, we can see that there exists a select few money managers that elected to cut their full holdings in the first quarter. Interestingly, Roger Ibbotson’s Zebra Capital Management cut the largest investment of all the hedgies tracked by Insider Monkey, valued at close to $0.3 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund cut about $0 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds in the first quarter.

Let’s also examine hedge fund activity in other stocks similar to IES Holdings, Inc. (NASDAQ:IESC). We will take a look at Impinj, Inc. (NASDAQ:PI), Satsuma Pharmaceuticals, Inc. (NASDAQ:STSA), Fortuna Silver Mines Inc. (NYSE:FSM), and Ruhnn Holding Limited (NASDAQ:RUHN). This group of stocks’ market valuations are closest to IESC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PI 18 137212 -2
STSA 5 157511 0
FSM 8 33856 -1
RUHN 2 228 0
Average 8.25 82202 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.25 hedge funds with bullish positions and the average amount invested in these stocks was $82 million. That figure was $237 million in IESC’s case. Impinj, Inc. (NASDAQ:PI) is the most popular stock in this table. On the other hand Ruhnn Holding Limited (NASDAQ:RUHN) is the least popular one with only 2 bullish hedge fund positions. IES Holdings, Inc. (NASDAQ:IESC) is not the most popular stock in this group but hedge fund interest is still above average. 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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on IESC as the stock returned 31.3% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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