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Should I Buy IAC/InterActiveCorp (IAC)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded IAC/InterActiveCorp (NASDAQ:IAC) and determine whether the smart money was really smart about this stock.

Is IAC/InterActiveCorp (NASDAQ:IAC) a healthy stock for your portfolio? Prominent investors were buying. The number of long hedge fund bets inched up by 3 lately. IAC/InterActiveCorp (NASDAQ:IAC) was in 60 hedge funds’ portfolios at the end of June. The all time high for this statistics is 71. Our calculations also showed that IAC isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 57 hedge funds in our database with IAC positions at the end of the first quarter.

Video: 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Keith Meister of Corvex Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Currently, investors are pessimistic about commercial real estate investments. So, we are checking out this contrarian play to diversify our market exposure. We go through lists like the 10 most profitable companies in America 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind let’s take a glance at the new hedge fund action surrounding IAC/InterActiveCorp (NASDAQ:IAC).

How are hedge funds trading IAC/InterActiveCorp (NASDAQ:IAC)?

At Q2’s end, a total of 60 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from one quarter earlier. On the other hand, there were a total of 47 hedge funds with a bullish position in IAC a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

Among these funds, Aristeia Capital held the most valuable stake in IAC/InterActiveCorp (NASDAQ:IAC), which was worth $705.4 million at the end of the third quarter. On the second spot was Ursa Fund Management which amassed $629.8 million worth of shares. Farallon Capital, Luxor Capital Group, 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 Ursa Fund Management allocated the biggest weight to IAC/InterActiveCorp (NASDAQ:IAC), around 38.09% of its 13F portfolio. Aristeia Capital is also relatively very bullish on the stock, designating 36.05 percent of its 13F equity portfolio to IAC.

As aggregate interest increased, specific money managers were breaking ground themselves. Corvex Capital, managed by Keith Meister, established the biggest position in IAC/InterActiveCorp (NASDAQ:IAC). Corvex Capital had $148.5 million invested in the company at the end of the quarter. Peter S. Park’s Park West Asset Management also made a $80.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Dmitry Balyasny’s Balyasny Asset Management, Alexander Mitchell’s Scopus Asset Management, and John Khabbaz’s Phoenician Capital.

Let’s also examine hedge fund activity in other stocks similar to IAC/InterActiveCorp (NASDAQ:IAC). These stocks are Agilent Technologies Inc. (NYSE:A), Paychex, Inc. (NASDAQ:PAYX), IQVIA Holdings, Inc. (NYSE:IQV), The Hershey Company (NYSE:HSY), CRH PLC (NYSE:CRH), ING Groep N.V. (NYSE:ING), and TE Connectivity Ltd. (NYSE:TEL). This group of stocks’ market caps are closest to IAC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
A 38 2815048 3
PAYX 36 877442 -5
IQV 66 3022562 6
HSY 39 1028323 6
CRH 7 76935 -3
ING 13 385807 0
TEL 39 2000251 6
Average 34 1458053 1.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 34 hedge funds with bullish positions and the average amount invested in these stocks was $1458 million. That figure was $4956 million in IAC’s case. IQVIA Holdings, Inc. (NYSE:IQV) is the most popular stock in this table. On the other hand CRH PLC (NYSE:CRH) is the least popular one with only 7 bullish hedge fund positions. IAC/InterActiveCorp (NASDAQ:IAC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for IAC is 78.3. 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 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 28.2% in 2020 through August 24th but still beat the market by 20.6 percentage points. Hedge funds were also right about betting on IAC as the stock returned 22.4% since 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.