Were Hedge Funds Right About Embracing IHS Markit Ltd. (INFO)?

Is IHS Markit Ltd. (NYSE:INFO) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

IHS Markit Ltd. (NYSE:INFO) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 44 hedge funds’ portfolios at the end of the second quarter of 2020. Our calculations also showed that INFO 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). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Canadian Imperial Bank of Commerce (NYSE:CM), EOG Resources Inc (NYSE:EOG), and Royalty Pharma plc (NASDAQ:RPRX) to gather more data points. Our calculations also showed that INFO 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).

Video: Watch our video about the top 5 most popular hedge fund stocks.

To most stock holders, hedge funds are perceived as underperforming, outdated investment vehicles of the past. While there are more than 8000 funds trading today, We choose to focus on the leaders of this group, about 850 funds. These money managers shepherd bulk of all hedge funds’ total capital, and by shadowing their unrivaled equity investments, Insider Monkey has found various investment strategies that have historically outrun Mr. Market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Sahm Adrangi Kerrisdale Capital

Sahm Adrangi of Kerrisdale Capital

Now let’s take a look at the new hedge fund action encompassing IHS Markit Ltd. (NYSE:INFO).

How have hedgies been trading IHS Markit Ltd. (NYSE:INFO)?

At second quarter’s end, a total of 44 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards INFO over the last 20 quarters. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

More specifically, Select Equity Group was the largest shareholder of IHS Markit Ltd. (NYSE:INFO), with a stake worth $474.2 million reported as of the end of September. Trailing Select Equity Group was Farallon Capital, which amassed a stake valued at $295.2 million. Junto Capital Management, Citadel Investment Group, and Echo Street Capital Management 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 Sunriver Management allocated the biggest weight to IHS Markit Ltd. (NYSE:INFO), around 5.86% of its 13F portfolio. Corsair Capital Management is also relatively very bullish on the stock, designating 5.21 percent of its 13F equity portfolio to INFO.

Since IHS Markit Ltd. (NYSE:INFO) has witnessed a decline in interest from hedge fund managers, logic holds that there lies a certain “tier” of money managers who sold off their positions entirely by the end of the second quarter. Intriguingly, Renaissance Technologies dumped the largest investment of all the hedgies monitored by Insider Monkey, valued at about $35.1 million in stock. Ravee Mehta’s fund, Nishkama Capital, also cut its stock, about $11.2 million worth. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks similar to IHS Markit Ltd. (NYSE:INFO). We will take a look at Canadian Imperial Bank of Commerce (NYSE:CM), EOG Resources Inc (NYSE:EOG), Royalty Pharma plc (NASDAQ:RPRX), Seagen Inc. (NASDAQ:SGEN), Synopsys, Inc. (NASDAQ:SNPS), Brown-Forman Corporation (NYSE:BF), and Chipotle Mexican Grill, Inc. (NYSE:CMG). This group of stocks’ market valuations are similar to INFO’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CM 6 158840 -4
EOG 45 696070 1
RPRX 24 2716389 24
SGEN 38 8430115 11
SNPS 34 931266 3
BF 28 521945 0
CMG 41 3780591 -7
Average 30.9 2462174 4

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.9 hedge funds with bullish positions and the average amount invested in these stocks was $2462 million. That figure was $1532 million in INFO’s case. EOG Resources Inc (NYSE:EOG) is the most popular stock in this table. On the other hand Canadian Imperial Bank of Commerce (NYSE:CM) is the least popular one with only 6 bullish hedge fund positions. IHS Markit Ltd. (NYSE:INFO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for INFO is 83.7. 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. 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 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 30% in 2020 through October 23rd and beat the market by 21 percentage points. Unfortunately INFO wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on INFO were disappointed as the stock returned 10.2% since the end of June (through 10/23) 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 many of these stocks already outperformed the market so far this year.

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