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Were Hedge Funds Right About IQVIA Holdings, Inc. (IQV)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of IQVIA Holdings, Inc. (NYSE:IQV) based on that data and determine whether they were really smart about the stock.

Is IQVIA Holdings, Inc. (NYSE:IQV) a cheap investment right now? Money managers were in a pessimistic mood. The number of long hedge fund bets were trimmed by 4 recently. Our calculations also showed that IQV 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). IQV was in 60 hedge funds’ portfolios at the end of the first quarter of 2020. There were 64 hedge funds in our database with IQV positions at the end of the previous quarter.

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

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

DUQUESNE CAPITAL

Stanley Druckenmiller of Duquesne 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. Keeping this in mind let’s take a look at the fresh hedge fund action regarding IQVIA Holdings, Inc. (NYSE:IQV).

How have hedgies been trading IQVIA Holdings, Inc. (NYSE:IQV)?

At Q1’s end, a total of 60 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards IQV over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Farallon Capital was the largest shareholder of IQVIA Holdings, Inc. (NYSE:IQV), with a stake worth $403.4 million reported as of the end of September. Trailing Farallon Capital was Steadfast Capital Management, which amassed a stake valued at $307.7 million. Third Point, D E Shaw, and Glenview 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 RIT Capital Partners allocated the biggest weight to IQVIA Holdings, Inc. (NYSE:IQV), around 18.86% of its 13F portfolio. Cowbird Capital is also relatively very bullish on the stock, designating 16.2 percent of its 13F equity portfolio to IQV.

Because IQVIA Holdings, Inc. (NYSE:IQV) has faced declining sentiment from hedge fund managers, it’s safe to say that there was a specific group of hedge funds who were dropping their positions entirely by the end of the first quarter. It’s worth mentioning that Lone Pine Capital said goodbye to the biggest stake of the “upper crust” of funds tracked by Insider Monkey, comprising an estimated $476.2 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund cut about $145.3 million worth. These moves are important to note, as aggregate hedge fund interest fell by 4 funds by the end of the first quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as IQVIA Holdings, Inc. (NYSE:IQV) but similarly valued. We will take a look at ZTO Express (Cayman) Inc. (NYSE:ZTO), AvalonBay Communities Inc (NYSE:AVB), Prudential Financial Inc (NYSE:PRU), and Sea Limited (NYSE:SE). This group of stocks’ market valuations match IQV’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ZTO 15 562997 1
AVB 30 377394 7
PRU 28 367179 -8
SE 76 3132301 0
Average 37.25 1109968 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.25 hedge funds with bullish positions and the average amount invested in these stocks was $1110 million. That figure was $2474 million in IQV’s case. Sea Limited (NYSE:SE) is the most popular stock in this table. On the other hand ZTO Express (Cayman) Inc. (NYSE:ZTO) is the least popular one with only 15 bullish hedge fund positions. IQVIA Holdings, Inc. (NYSE:IQV) 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 IQV as the stock returned 31.5% 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.