World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients' money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It's not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It's also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.
ICON Public Limited Company (NASDAQ:ICLR) was in 19 hedge funds' portfolios at the end of the second quarter of 2019. ICLR has seen a decrease in enthusiasm from smart money recently. There were 27 hedge funds in our database with ICLR positions at the end of the previous quarter. Our calculations also showed that ICLR isn't among the 30 most popular stocks among hedge funds (view the video below). Video: Click the image to 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 market by 40 percentage points since May 2014 through May 30, 2019 (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 our short portfolio.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to take a look at the key hedge fund action regarding ICON Public Limited Company (NASDAQ:ICLR).
Hedge fund activity in ICON Public Limited Company (NASDAQ:ICLR)
At the end of the second quarter, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -30% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ICLR over the last 16 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.
The largest stake in ICON Public Limited Company (NASDAQ:ICLR) was held by Renaissance Technologies, which reported holding $348.6 million worth of stock at the end of March. It was followed by Citadel Investment Group with a $96.7 million position. Other investors bullish on the company included Arrowstreet Capital, Millennium Management, and Point72 Asset Management.
Since ICON Public Limited Company (NASDAQ:ICLR) has witnessed falling interest from the aggregate hedge fund industry, we can see that there exists a select few money managers that slashed their entire stakes by the end of the second quarter. Intriguingly, Arthur B Cohen and Joseph Healey's Healthcor Management LP dropped the largest stake of all the hedgies watched by Insider Monkey, worth an estimated $55.8 million in stock. Vishal Saluja and Pham Quang's fund, Endurant Capital Management, also cut its stock, about $13.8 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 8 funds by the end of the second quarter.
Let's now review hedge fund activity in other stocks similar to ICON Public Limited Company (NASDAQ:ICLR). These stocks are Woori Financial Group Inc. (NYSE:WF), Coupa Software Incorporated (NASDAQ:COUP), ON Semiconductor Corporation (NASDAQ:ON), and Formula One Group (NASDAQ:FWONA). This group of stocks' market values resemble ICLR's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WF,1,1327,0 COUP,57,2232647,16 ON,26,525773,-13 FWONA,18,322574,-3 Average,25.5,770580,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.5 hedge funds with bullish positions and the average amount invested in these stocks was $771 million. That figure was $828 million in ICLR's case. Coupa Software Incorporated (NASDAQ:COUP) is the most popular stock in this table. On the other hand Woori Financial Group Inc. (NYSE:WF) is the least popular one with only 1 bullish hedge fund positions. ICON Public Limited Company (NASDAQ:ICLR) 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately ICLR wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ICLR investors were disappointed as the stock returned -4.3% during the third 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.