Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about S&P Global Inc. (NYSE:SPGI).
Hedge fund interest in S&P Global Inc. (NYSE:SPGI) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that SPGI 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). At the end of this article we will also compare SPGI to other stocks including BlackRock, Inc. (NYSE:BLK), Intuit Inc. (NASDAQ:INTU), and Toronto-Dominion Bank (NYSE:TD) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets. Tesla’s stock price skyrocketed, yet lithium prices are still below their 2019 highs. So, we are checking out this lithium 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. Now let’s take a look at the key hedge fund action encompassing S&P Global Inc. (NYSE:SPGI).
What does smart money think about S&P Global Inc. (NYSE:SPGI)?
At the end of September, a total of 71 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. By comparison, 75 hedge funds held shares or bullish call options in SPGI a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Cantillon Capital Management was the largest shareholder of S&P Global Inc. (NYSE:SPGI), with a stake worth $940.6 million reported as of the end of September. Trailing Cantillon Capital Management was Third Point, which amassed a stake valued at $279.5 million. Valley Forge Capital, GLG Partners, and Intermede Investment Partners 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 Rings Capital Management allocated the biggest weight to S&P Global Inc. (NYSE:SPGI), around 47.13% of its 13F portfolio. Valley Forge Capital is also relatively very bullish on the stock, earmarking 24.81 percent of its 13F equity portfolio to SPGI.
Due to the fact that S&P Global Inc. (NYSE:SPGI) has experienced falling interest from the smart money, we can see that there was a specific group of hedge funds that elected to cut their positions entirely last quarter. It’s worth mentioning that Anand Parekh’s Alyeska Investment Group cut the largest stake of all the hedgies monitored by Insider Monkey, worth close to $22.1 million in stock, and Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners was right behind this move, as the fund sold off about $10.4 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks similar to S&P Global Inc. (NYSE:SPGI). These stocks are BlackRock, Inc. (NYSE:BLK), Intuit Inc. (NASDAQ:INTU), Toronto-Dominion Bank (NYSE:TD), Intuitive Surgical, Inc. (NASDAQ:ISRG), British American Tobacco plc (NYSE:BTI), Mondelez International Inc (NASDAQ:MDLZ), and Caterpillar Inc. (NYSE:CAT). This group of stocks’ market valuations are closest to SPGI’s market valuation.
|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 36.6 hedge funds with bullish positions and the average amount invested in these stocks was $1518 million. That figure was $3031 million in SPGI’s case. Intuit Inc. (NASDAQ:INTU) is the most popular stock in this table. On the other hand British American Tobacco plc (NYSE:BTI) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks S&P Global Inc. (NYSE:SPGI) is more popular among hedge funds. Our overall hedge fund sentiment score for SPGI is 83. 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 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. Unfortunately SPGI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SPGI were disappointed as the stock returned -5.1% since the end of the third quarter (through 11/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.