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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). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. 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 World Fuel Services Corporation (NYSE:INT) at the end of the second quarter and determine whether the smart money was really smart about this stock.
World Fuel Services Corporation (NYSE:INT) was in 18 hedge funds' portfolios at the end of June. The all time high for this statistics is 24. INT investors should pay attention to an increase in activity from the world's largest hedge funds lately. There were 13 hedge funds in our database with INT positions at the end of the first quarter. Our calculations also showed that INT 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.
To most market participants, hedge funds are viewed as unimportant, old investment vehicles of years past. While there are greater than 8000 funds trading at the moment, We choose to focus on the bigwigs of this club, about 850 funds. These money managers preside over the majority of the smart money's total asset base, and by tracking their highest performing stock picks, Insider Monkey has deciphered various investment strategies that have historically defeated the broader indices. Insider Monkey's flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Peter Rathjens of Arrowstreet Capital
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 are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. 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 let's take a peek at the recent hedge fund action regarding World Fuel Services Corporation (NYSE:INT).
How have hedgies been trading World Fuel Services Corporation (NYSE:INT)?
At Q2's end, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 38% from the previous quarter. By comparison, 19 hedge funds held shares or bullish call options in INT a year ago. With the smart money's sentiment swirling, there exists a few key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the most valuable position in World Fuel Services Corporation (NYSE:INT). AQR Capital Management has a $59.3 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is D E Shaw, managed by D. E. Shaw, which holds a $8.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers with similar optimism contain Paul Marshall and Ian Wace's Marshall Wace LLP, Chuck Royce's Royce & Associates and Renaissance Technologies. In terms of the portfolio weights assigned to each position AlphaOne Capital Partners allocated the biggest weight to World Fuel Services Corporation (NYSE:INT), around 0.79% of its 13F portfolio. AQR Capital Management is also relatively very bullish on the stock, earmarking 0.1 percent of its 13F equity portfolio to INT.
As aggregate interest increased, key money managers have jumped into World Fuel Services Corporation (NYSE:INT) headfirst. Millennium Management, managed by Israel Englander, initiated the biggest position in World Fuel Services Corporation (NYSE:INT). Millennium Management had $1.3 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also made a $0.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors, and Dmitry Balyasny's Balyasny Asset Management.
Let's go over hedge fund activity in other stocks similar to World Fuel Services Corporation (NYSE:INT). We will take a look at Editas Medicine, Inc. (NASDAQ:EDIT), Medifast, Inc. (NYSE:MED), Six Flags Entertainment Corp (NYSE:SIX), Epizyme Inc (NASDAQ:EPZM), Eldorado Gold Corp (NYSE:EGO), Sogou Inc. (NYSE:SOGO), and JELD-WEN Holding, Inc. (NYSE:JELD). This group of stocks' market caps are similar to INT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EDIT,22,126680,6 MED,18,441390,2 SIX,33,494437,3 EPZM,23,317359,1 EGO,12,224197,-2 SOGO,5,15881,-1 JELD,15,193669,-5 Average,18.3,259088,0.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.3 hedge funds with bullish positions and the average amount invested in these stocks was $259 million. That figure was $83 million in INT's case. Six Flags Entertainment Corp (NYSE:SIX) is the most popular stock in this table. On the other hand Sogou Inc. (NYSE:SOGO) is the least popular one with only 5 bullish hedge fund positions. World Fuel Services Corporation (NYSE:INT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for INT is 55.7. 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. 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 24.8% in 2020 through the end of September and surpassed the market by 19.3 percentage points. Unfortunately INT wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); INT investors were disappointed as the stock returned -17.4% in 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 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.