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

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 thoughtIHS Markit Ltd. (NYSE:INFO) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Is IHS Markit Ltd. (NYSE:INFO) an outstanding investment today? Money managers were turning bullish. The number of bullish hedge fund bets inched up by 15 recently. Our calculations also showed that INFO 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.

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 58 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Michael Lowenstein Kensico Capital

Michael Lowenstein of Kensico Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, this trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost gold prices. So, we are checking out this junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. 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. With all of this in mind we’re going to take a gander at the latest hedge fund action encompassing IHS Markit Ltd. (NYSE:INFO).

What does smart money think about IHS Markit Ltd. (NYSE:INFO)?

At Q1’s end, a total of 44 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 52% from the previous quarter. The graph below displays the number of hedge funds with bullish position in INFO over the last 18 quarters. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

More specifically, Select Equity Group was the largest shareholder of IHS Markit Ltd. (NYSE:INFO), with a stake worth $385.9 million reported as of the end of September. Trailing Select Equity Group was Farallon Capital, which amassed a stake valued at $295.5 million. D E Shaw, Echo Street Capital Management, and Arrowstreet Capital 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 Nishkama Capital allocated the biggest weight to IHS Markit Ltd. (NYSE:INFO), around 16% of its 13F portfolio. Sunriver Management is also relatively very bullish on the stock, earmarking 7.02 percent of its 13F equity portfolio to INFO.

Consequently, key hedge funds were leading the bulls’ herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the largest position in IHS Markit Ltd. (NYSE:INFO). Arrowstreet Capital had $41.9 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $35.1 million position during the quarter. The other funds with new positions in the stock are James Parsons’s Junto Capital Management, Michael Lowenstein’s Kensico Capital, and Mikal Patel’s Oribel Capital Management.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as IHS Markit Ltd. (NYSE:INFO) but similarly valued. We will take a look at eBay Inc (NASDAQ:EBAY), Telefonica S.A. (NYSE:TEF), The Kroger Co. (NYSE:KR), and Phillips 66 (NYSE:PSX). This group of stocks’ market values are closest to INFO’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EBAY 52 3096036 1
TEF 7 16531 -2
KR 43 1581591 12
PSX 43 420207 -3
Average 36.25 1278591 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 36.25 hedge funds with bullish positions and the average amount invested in these stocks was $1279 million. That figure was $1159 million in INFO’s case. eBay Inc (NASDAQ:EBAY) is the most popular stock in this table. On the other hand Telefonica S.A. (NYSE:TEF) is the least popular one with only 7 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 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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on INFO as the stock returned 26.2% in 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.