Were Hedge Funds Right About Dumping World Fuel Services Corporation (INT)?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 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 March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtWorld Fuel Services Corporation (NYSE:INT) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

World Fuel Services Corporation (NYSE:INT) was in 13 hedge funds’ portfolios at the end of the first quarter of 2020. INT has seen a decrease in support from the world’s most elite money managers recently. There were 22 hedge funds in our database with INT positions at the end of the previous quarter. Our calculations also showed that INT 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.

According to most investors, hedge funds are assumed to be worthless, old investment vehicles of years past. While there are more than 8000 funds with their doors open today, Our researchers hone in on the elite of this club, around 850 funds. These investment experts orchestrate the majority of the smart money’s total asset base, and by monitoring their first-class equity investments, Insider Monkey has figured out several investment strategies that have historically beaten the market. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Paul Marshall Marshall Wace

Paul Marshall of Marshall Wace

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 7 most expensive cigarette brands to identify emerging trends that are likely to lead to 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. 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. Keeping this in mind let’s analyze the new hedge fund action encompassing World Fuel Services Corporation (NYSE:INT).

How have hedgies been trading World Fuel Services Corporation (NYSE:INT)?

At the end of the first quarter, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -41% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards INT over the last 18 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

The largest stake in World Fuel Services Corporation (NYSE:INT) was held by AQR Capital Management, which reported holding $56.4 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $19.8 million position. Other investors bullish on the company included Royce & Associates, Marshall Wace LLP, and D E Shaw. In terms of the portfolio weights assigned to each position AlphaOne Capital Partners allocated the biggest weight to World Fuel Services Corporation (NYSE:INT), around 1.03% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, dishing out 0.21 percent of its 13F equity portfolio to INT.

Because World Fuel Services Corporation (NYSE:INT) has witnessed a decline in interest from the smart money, logic holds that there lies a certain “tier” of fund managers that elected to cut their full holdings heading into Q4. At the top of the heap, David Rosen’s Rubric Capital Management dropped the biggest stake of all the hedgies monitored by Insider Monkey, totaling about $21 million in stock, and Todd J. Kantor’s Encompass Capital Advisors was right behind this move, as the fund dumped about $14.1 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 9 funds heading into Q4.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as World Fuel Services Corporation (NYSE:INT) but similarly valued. We will take a look at New Fortress Energy LLC (NASDAQ:NFE), SJW Group (NYSE:SJW), YPF Sociedad Anonima (NYSE:YPF), and Navistar International Corp (NYSE:NAV). All of these stocks’ market caps are closest to INT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NFE 2 19235 1
SJW 10 98677 -1
YPF 13 24977 -2
NAV 36 760172 9
Average 15.25 225765 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $226 million. That figure was $98 million in INT’s case. Navistar International Corp (NYSE:NAV) is the most popular stock in this table. On the other hand New Fortress Energy LLC (NASDAQ:NFE) is the least popular one with only 2 bullish hedge fund positions. World Fuel Services Corporation (NYSE:INT) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 13.3% in 2020 through June 25th and surpassed the market by 16.8 percentage points. Unfortunately INT wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); INT investors were disappointed as the stock returned -2.5% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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