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Hedge Funds Are Buying ICON Public Limited Company (ICLR)

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How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding ICON Public Limited Company (NASDAQ:ICLR) and determine whether hedge funds had an edge regarding this stock.

ICON Public Limited Company (NASDAQ:ICLR) has experienced an increase in hedge fund sentiment lately. ICON Public Limited Company (NASDAQ:ICLR) was in 24 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 27. Our calculations also showed that ICLR isn't among the 30 most popular stocks among hedge funds (click for Q2 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.

Today there are a lot of metrics stock traders employ to assess stocks. A pair of the less known metrics are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the best investment managers can beat the S&P 500 by a very impressive margin (see the details here).

Ken Griffin
Ken Griffin

Ken Griffin of Citadel Investment Group

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. With all of this in mind we're going to take a glance at the new hedge fund action regarding ICON Public Limited Company (NASDAQ:ICLR).

How are hedge funds trading ICON Public Limited Company (NASDAQ:ICLR)?

At Q2's end, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ICLR over the last 20 quarters. With the smart money's capital changing hands, there exists an "upper tier" of key hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in ICON Public Limited Company (NASDAQ:ICLR), which was worth $432.7 million at the end of the third quarter. On the second spot was D E Shaw which amassed $26.5 million worth of shares. Polar Capital, Citadel Investment Group, and Partner Fund 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 Running Oak Capital allocated the biggest weight to ICON Public Limited Company (NASDAQ:ICLR), around 1.82% of its 13F portfolio. Intrepid Capital Management is also relatively very bullish on the stock, designating 1.4 percent of its 13F equity portfolio to ICLR.

As industrywide interest jumped, key money managers have been driving this bullishness. Running Oak Capital, managed by Seth Cogswell, initiated the biggest position in ICON Public Limited Company (NASDAQ:ICLR). Running Oak Capital had $4.6 million invested in the company at the end of the quarter. Jerome Pfund and Michael Sjostrom's Sectoral Asset Management also made a $1.3 million investment in the stock during the quarter. The other funds with brand new ICLR positions are Minhua Zhang's Weld Capital Management, Greg Eisner's Engineers Gate Manager, and Michael Gelband's ExodusPoint Capital.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as ICON Public Limited Company (NASDAQ:ICLR) but similarly valued. These stocks are Fortune Brands Home & Security Inc (NYSE:FBHS), NIO Limited (NYSE:NIO), Dr. Reddy's Laboratories Limited (NYSE:RDY), 10x Genomics, Inc. (NASDAQ:TXG), Crown Holdings, Inc. (NYSE:CCK), Fastly, Inc. (NYSE:FSLY), and Cna Financial Corporation (NYSE:CNA). This group of stocks' market caps match ICLR's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FBHS,34,395135,3 NIO,30,567819,14 RDY,12,173335,1 TXG,19,313211,-1 CCK,51,1239713,-5 FSLY,27,1662391,5 CNA,12,48476,0 Average,26.4,628583,2.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.4 hedge funds with bullish positions and the average amount invested in these stocks was $629 million. That figure was $590 million in ICLR's case. Crown Holdings, Inc. (NYSE:CCK) is the most popular stock in this table. On the other hand Dr. Reddy's Laboratories Limited (NYSE:RDY) is the least popular one with only 12 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. Our overall hedge fund sentiment score for ICLR is 50.1. 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. 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 21.3% in 2020 through September 25th and still beat the market by 17.7 percentage points. A small number of hedge funds were also right about betting on ICLR as the stock returned 8.7% since the end of June (through September 25th) and outperformed the market by an even larger margin.

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

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