We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money 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 (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards The Interpublic Group of Companies Inc (NYSE:IPG).
Is IPG a good stock to buy? The Interpublic Group of Companies Inc (NYSE:IPG) has experienced an increase in hedge fund interest lately. The Interpublic Group of Companies Inc (NYSE:IPG) was in 31 hedge funds’ portfolios at the end of September. The all time high for this statistic is 37. Our calculations also showed that IPG isn’t among the 30 most popular stocks among hedge funds (click for Q3 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 financial world there are a multitude of formulas stock traders put to use to grade their stock investments. A pair of the less utilized formulas are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the top money managers can beat the S&P 500 by a solid amount (see the details here).
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we’re going to take a peek at the new hedge fund action surrounding The Interpublic Group of Companies Inc (NYSE:IPG).
Do Hedge Funds Think IPG Is A Good Stock To Buy Now?
At the end of September, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 41% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in IPG over the last 21 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
Among these funds, Ariel Investments held the most valuable stake in The Interpublic Group of Companies Inc (NYSE:IPG), which was worth $159.7 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $60.8 million worth of shares. Adage Capital Management, AQR Capital Management, and Citadel Investment Group 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 Ariel Investments allocated the biggest weight to The Interpublic Group of Companies Inc (NYSE:IPG), around 2.32% of its 13F portfolio. L2 Asset Management is also relatively very bullish on the stock, setting aside 0.38 percent of its 13F equity portfolio to IPG.
With a general bullishness amongst the heavyweights, specific money managers have jumped into The Interpublic Group of Companies Inc (NYSE:IPG) headfirst. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the largest position in The Interpublic Group of Companies Inc (NYSE:IPG). Balyasny Asset Management had $11.7 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also initiated a $2.3 million position during the quarter. The other funds with brand new IPG positions are Paul Tudor Jones’s Tudor Investment Corp, Greg Eisner’s Engineers Gate Manager, and Jinghua Yan’s TwinBeech Capital.
Let’s go over hedge fund activity in other stocks similar to The Interpublic Group of Companies Inc (NYSE:IPG). We will take a look at PRA Health Sciences Inc (NASDAQ:PRAH), Reinsurance Group of America Inc (NYSE:RGA), Encompass Health Corporation (NYSE:EHC), Churchill Downs Incorporated (NASDAQ:CHDN), Regency Centers Corp (NASDAQ:REG), Ritchie Bros. Auctioneers Incorporated (NYSE:RBA), and Vornado Realty Trust (NYSE:VNO). All of these stocks’ market caps are similar to IPG’s market cap.
|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 25.6 hedge funds with bullish positions and the average amount invested in these stocks was $337 million. That figure was $486 million in IPG’s case. Encompass Health Corporation (NYSE:EHC) is the most popular stock in this table. On the other hand Vornado Realty Trust (NYSE:VNO) is the least popular one with only 20 bullish hedge fund positions. The Interpublic Group of Companies Inc (NYSE:IPG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for IPG is 81. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 percentage points. These stocks gained 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on IPG as the stock returned 45.2% since the end of Q3 (through 12/18) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.