Should You Buy Intercontinental Exchange Inc (ICE)?

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Intercontinental Exchange Inc (NYSE:ICE) in this article.

Intercontinental Exchange Inc (NYSE:ICE) was in 43 hedge funds’ portfolios at the end of September. ICE has seen an increase in activity from the world’s largest hedge funds lately. There were 35 hedge funds in our database with ICE positions at the end of the previous quarter. Our calculations also showed that ICE isn’t among the 30 most popular stocks among hedge funds.

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 has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Harold Levy Iridian Asset Management

Harold Levy of Iridian Asset Management

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s check out the recent hedge fund action encompassing Intercontinental Exchange Inc (NYSE:ICE).

How have hedgies been trading Intercontinental Exchange Inc (NYSE:ICE)?

At Q3’s end, a total of 43 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 23% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ICE over the last 17 quarters. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

No of Hedge Funds with ICE Positions

The largest stake in Intercontinental Exchange Inc (NYSE:ICE) was held by Cantillon Capital Management, which reported holding $419.3 million worth of stock at the end of September. It was followed by GQG Partners with a $312.7 million position. Other investors bullish on the company included Alkeon Capital Management, D E Shaw, and Iridian Asset Management. In terms of the portfolio weights assigned to each position Prana Capital Management allocated the biggest weight to Intercontinental Exchange Inc (NYSE:ICE), around 6.91% of its portfolio. Crescent Park Management is also relatively very bullish on the stock, earmarking 5.9 percent of its 13F equity portfolio to ICE.

As aggregate interest increased, specific money managers were leading the bulls’ herd. Echo Street Capital Management, managed by Greg Poole, established the largest position in Intercontinental Exchange Inc (NYSE:ICE). Echo Street Capital Management had $53.1 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $9.1 million position during the quarter. The following funds were also among the new ICE investors: Michael Kharitonov and Jon David McAuliffe’s Voleon Capital, Benjamin A. Smith’s Laurion Capital Management, and Jaime Sterne’s Skye Global Management.

Let’s now review hedge fund activity in other stocks similar to Intercontinental Exchange Inc (NYSE:ICE). We will take a look at The Sherwin-Williams Company (NYSE:SHW), Marsh & McLennan Companies, Inc. (NYSE:MMC), Illinois Tool Works Inc. (NYSE:ITW), and Walgreens Boots Alliance Inc (NASDAQ:WBA). This group of stocks’ market values match ICE’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SHW 45 1587764 5
MMC 26 579695 -3
ITW 28 335340 0
WBA 34 831418 -7
Average 33.25 833554 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 33.25 hedge funds with bullish positions and the average amount invested in these stocks was $834 million. That figure was $2291 million in ICE’s case. The Sherwin-Williams Company (NYSE:SHW) is the most popular stock in this table. On the other hand Marsh & McLennan Companies, Inc. (NYSE:MMC) is the least popular one with only 26 bullish hedge fund positions. Intercontinental Exchange Inc (NYSE:ICE) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately ICE wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ICE were disappointed as the stock returned 1.6% during the fourth quarter (through 11/22) 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 many of these stocks already outperformed the market so far this year.

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