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At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (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. In this article, we will take a closer look at hedge fund sentiment towards Iron Mountain Incorporated (NYSE:IRM) at the end of the first quarter and determine whether the smart money was really smart about this stock.
Iron Mountain Incorporated (NYSE:IRM) was in 19 hedge funds' portfolios at the end of March. IRM shareholders have witnessed an increase in enthusiasm from smart money of late. There were 17 hedge funds in our database with IRM holdings at the end of the previous quarter. Our calculations also showed that IRM 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.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research was 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'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.
Joel Greenblatt of Gotham Asset Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. We go through lists like the 10 most profitable companies in America 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now let's take a look at the fresh hedge fund action surrounding Iron Mountain Incorporated (NYSE:IRM).
How are hedge funds trading Iron Mountain Incorporated (NYSE:IRM)?
At the end of the first quarter, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 12% from the fourth quarter of 2019. By comparison, 18 hedge funds held shares or bullish call options in IRM a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Israel Englander's Millennium Management has the most valuable position in Iron Mountain Incorporated (NYSE:IRM), worth close to $14.5 million, amounting to less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is Two Sigma Advisors, managed by John Overdeck and David Siegel, which holds a $12.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism contain Ken Griffin's Citadel Investment Group, Phill Gross and Robert Atchinson's Adage Capital Management and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital. In terms of the portfolio weights assigned to each position AlphaCrest Capital Management allocated the biggest weight to Iron Mountain Incorporated (NYSE:IRM), around 0.16% of its 13F portfolio. Neo Ivy Capital is also relatively very bullish on the stock, designating 0.15 percent of its 13F equity portfolio to IRM.
As one would reasonably expect, key money managers were breaking ground themselves. Millennium Management, managed by Israel Englander, initiated the most valuable position in Iron Mountain Incorporated (NYSE:IRM). Millennium Management had $14.5 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital also initiated a $2.9 million position during the quarter. The other funds with new positions in the stock are Renaissance Technologies, Michael Gelband's ExodusPoint Capital, and Ray Dalio's Bridgewater Associates.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Iron Mountain Incorporated (NYSE:IRM) but similarly valued. These stocks are NRG Energy Inc (NYSE:NRG), Americold Realty Trust (NYSE:COLD), Mobile TeleSystems OJSC (NYSE:MBT), and Mellanox Technologies, Ltd. (NASDAQ:MLNX). All of these stocks' market caps resemble IRM's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NRG,38,859890,-4 COLD,25,275635,-1 MBT,9,377645,-4 MLNX,44,1873688,5 Average,29,846715,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $847 million. That figure was $49 million in IRM's case. Mellanox Technologies, Ltd. (NASDAQ:MLNX) is the most popular stock in this table. On the other hand Mobile TeleSystems OJSC (NYSE:MBT) is the least popular one with only 9 bullish hedge fund positions. Iron Mountain Incorporated (NYSE:IRM) 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 18.6% in 2020 through July 27th and surpassed the market by 17.1 percentage points. Unfortunately IRM wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); IRM investors were disappointed as the stock returned 19.3% since Q1 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.
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Disclosure: None. This article was originally published at Insider Monkey.