In this article we are going to use hedge fund sentiment as a tool and determine whether ICL Group Ltd. (NYSE:ICL) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
ICL Group Ltd. (NYSE:ICL) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 5 hedge funds’ portfolios at the end of September. Our calculations also showed that ICL isn’t among the 30 most popular stocks among hedge funds (click for Q3 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 Asana Inc. (NYSE:ASAN), Signature Bank (NASDAQ:SBNY), and Virtu Financial Inc (NASDAQ:VIRT) to gather more data points.
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 66 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, 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 real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let’s review the latest hedge fund action encompassing ICL Group Ltd. (NYSE:ICL).
Hedge fund activity in ICL Group Ltd. (NYSE:ICL)
At the end of September, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. By comparison, 5 hedge funds held shares or bullish call options in ICL a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
Among these funds, Arrowstreet Capital held the most valuable stake in ICL Group Ltd. (NYSE:ICL), which was worth $14.5 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $3.9 million worth of shares. Plaisance Capital, Citadel Investment Group, and Two Sigma Advisors 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 Plaisance Capital allocated the biggest weight to ICL Group Ltd. (NYSE:ICL), around 0.43% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, setting aside 0.02 percent of its 13F equity portfolio to ICL.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Centiva Capital. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Plaisance Capital).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as ICL Group Ltd. (NYSE:ICL) but similarly valued. We will take a look at Asana Inc. (NYSE:ASAN), Signature Bank (NASDAQ:SBNY), Virtu Financial Inc (NASDAQ:VIRT), Haemonetics Corporation (NYSE:HAE), Change Healthcare Inc. (NASDAQ:CHNG), Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR), and Douglas Emmett, Inc. (NYSE:DEI). All of these stocks’ market caps match ICL’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.3 hedge funds with bullish positions and the average amount invested in these stocks was $516 million. That figure was $19 million in ICL’s case. Change Healthcare Inc. (NASDAQ:CHNG) is the most popular stock in this table. On the other hand Asana Inc. (NYSE:ASAN) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks ICL Group Ltd. (NYSE:ICL) is even less popular than ASAN. Our overall hedge fund sentiment score for ICL is 23.8. 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. Hedge funds clearly dropped the ball on ICL as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on ICL as the stock returned 36.7% since Q3 (through November 27th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.