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Did Hedge Funds Make The Right Call On Interactive Brokers Group, Inc. (IBKR) ?

Abigail Fisher
·6 mins read

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 thoughtInteractive Brokers Group, Inc. (NASDAQ:IBKR) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Interactive Brokers Group, Inc. (NASDAQ:IBKR) has experienced a decrease in activity from the world's largest hedge funds lately. Our calculations also showed that IBKR 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.

In the 21st century investor’s toolkit there are numerous signals shareholders can use to assess their stock investments. A pair of the most useful signals are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outpace the broader indices by a very impressive amount (see the details here).

[caption id="attachment_25981" align="aligncenter" width="392"] Paul Tudor Jones of Tudor Investment Corp[/caption]

TUDOR INVESTMENT CORP
TUDOR INVESTMENT CORP

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. 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. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. With all of this in mind we're going to review the new hedge fund action surrounding Interactive Brokers Group, Inc. (NASDAQ:IBKR).

How have hedgies been trading Interactive Brokers Group, Inc. (NASDAQ:IBKR)?

At Q1's end, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -24% from one quarter earlier. On the other hand, there were a total of 23 hedge funds with a bullish position in IBKR a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

Among these funds, Bares Capital Management held the most valuable stake in Interactive Brokers Group, Inc. (NASDAQ:IBKR), which was worth $262.5 million at the end of the third quarter. On the second spot was Cantillon Capital Management which amassed $107.7 million worth of shares. Ancient Art (Teton Capital), Select Equity Group, and Cat Rock 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 Ancient Art (Teton Capital) allocated the biggest weight to Interactive Brokers Group, Inc. (NASDAQ:IBKR), around 13.17% of its 13F portfolio. Bares Capital Management is also relatively very bullish on the stock, dishing out 9.46 percent of its 13F equity portfolio to IBKR.

Because Interactive Brokers Group, Inc. (NASDAQ:IBKR) has experienced bearish sentiment from the aggregate hedge fund industry, logic holds that there was a specific group of hedgies who sold off their positions entirely last quarter. At the top of the heap, Peter S. Park's Park West Asset Management dropped the largest stake of the 750 funds watched by Insider Monkey, valued at close to $28 million in stock, and Avi Fruchter's Anavon Capital was right behind this move, as the fund said goodbye to about $11.7 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 7 funds last quarter.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Interactive Brokers Group, Inc. (NASDAQ:IBKR) but similarly valued. We will take a look at Fortis Inc. (NYSE:FTS), Wipro Limited (NYSE:WIT), Corteva, Inc. (NYSE:CTVA), and Rockwell Automation Inc. (NYSE:ROK). All of these stocks' market caps are closest to IBKR's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FTS,15,347098,1 WIT,7,56972,-5 CTVA,36,509655,9 ROK,37,335488,-2 Average,23.75,312303,0.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.75 hedge funds with bullish positions and the average amount invested in these stocks was $312 million. That figure was $780 million in IBKR's case. Rockwell Automation Inc. (NYSE:ROK) is the most popular stock in this table. On the other hand Wipro Limited (NYSE:WIT) is the least popular one with only 7 bullish hedge fund positions. Interactive Brokers Group, Inc. (NASDAQ:IBKR) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 12.3% in 2020 through June 30th and surpassed the market by 15.5 percentage points. Unfortunately IBKR wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); IBKR investors were disappointed as the stock returned -3% during the second quarter 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 most of these stocks already outperformed the market in 2020.

Get real-time email alerts: Follow Interactive Brokers Group Inc. (NASDAQ:IBKR)

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

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