Were Hedge Funds Right About S&P Global Inc. (SPGI)?

Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Is S&P Global Inc. (NYSE:SPGI) 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.

Is S&P Global Inc. (NYSE:SPGI) a bargain? Prominent investors are taking a bullish view. The number of bullish hedge fund positions inched up by 1 in recent months. Our calculations also showed that SPGI isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

To most investors, hedge funds are assumed to be underperforming, old financial tools of yesteryear. While there are greater than 8000 funds in operation at present, Our researchers choose to focus on the moguls of this group, approximately 850 funds. These investment experts watch over most of all hedge funds’ total capital, and by paying attention to their first-class investments, Insider Monkey has unsheathed many investment strategies that have historically surpassed the market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

William Von Mueffling - Cantillon Capital Management

William Von Mueffling of Cantillon Capital Management

We leave no stone unturned when looking for the next great investment idea. For example, this trader is claiming triple digit returns, so we check out his latest trade recommendations. Federal Reserve and Central Banks all around world are printing money like there is no tomorrow, so we check out this this precious metals expert’s stock pick. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences (by the way watch this video if you want to hear one of the best healthcare hedge fund manager’s coronavirus analysis). Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to view the fresh hedge fund action encompassing S&P Global Inc. (NYSE:SPGI).

Hedge fund activity in S&P Global Inc. (NYSE:SPGI)

At Q4’s end, a total of 76 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 1% from the third quarter of 2019. By comparison, 54 hedge funds held shares or bullish call options in SPGI a year ago. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

Among these funds, Cantillon Capital Management held the most valuable stake in S&P Global Inc. (NYSE:SPGI), which was worth $714.8 million at the end of the third quarter. On the second spot was Egerton Capital Limited which amassed $454.8 million worth of shares. Orbis Investment Management, Third Point, and Millennium 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 Rings Capital Management allocated the biggest weight to S&P Global Inc. (NYSE:SPGI), around 45.14% of its 13F portfolio. Valley Forge Capital is also relatively very bullish on the stock, setting aside 22.36 percent of its 13F equity portfolio to SPGI.

With a general bullishness amongst the heavyweights, key money managers have jumped into S&P Global Inc. (NYSE:SPGI) headfirst. Rings Capital Management, managed by Dan Juran, initiated the most valuable position in S&P Global Inc. (NYSE:SPGI). Rings Capital Management had $66.5 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $17.2 million position during the quarter. The other funds with new positions in the stock are Stephen J. Errico’s Locust Wood Capital Advisers, Kevin McCarthy’s Breakline Capital, and Bruce Kovner’s Caxton Associates LP.

Let’s now take a look at hedge fund activity in other stocks similar to S&P Global Inc. (NYSE:SPGI). These stocks are Duke Energy Corporation (NYSE:DUK), Equinor ASA (NYSE:EQNR), Target Corporation (NYSE:TGT), and Canadian National Railway Company (NYSE:CNI). All of these stocks’ market caps resemble SPGI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DUK 37 1534613 5
EQNR 14 424786 -1
TGT 53 2495450 -2
CNI 29 2000657 0
Average 33.25 1613877 0.5

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 $1614 million. That figure was $3765 million in SPGI’s case. Target Corporation (NYSE:TGT) is the most popular stock in this table. On the other hand Equinor ASA (NYSE:EQNR) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks S&P Global Inc. (NYSE:SPGI) is more popular among hedge funds. 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 lost 1.0% in 2020 through April 20th but still managed to beat the market by 11 percentage points. Hedge funds were also right about betting on SPGI as the stock returned 2.5% so far in 2020 (through April 20th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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