Concerns over rising interest rates and expected further rate increases have hit several stocks hard during the fourth quarter of 2018. Trends reversed 180 degrees during the first half of 2019 amid Powell's pivot and optimistic expectations towards a trade deal with China. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were increasing their overall exposure in the second quarter and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards S&P Global Inc. (NYSE:SPGI).
S&P Global Inc. (NYSE:SPGI) was in 58 hedge funds' portfolios at the end of June. SPGI has seen an increase in enthusiasm from smart money recently. There were 54 hedge funds in our database with SPGI positions at the end of the previous quarter. Our calculations also showed that SPGI isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
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. Let's take a look at the key hedge fund action encompassing S&P Global Inc. (NYSE:SPGI).
What have hedge funds been doing with S&P Global Inc. (NYSE:SPGI)?
At the end of the second quarter, a total of 58 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from the first quarter of 2019. By comparison, 49 hedge funds held shares or bullish call options in SPGI 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.
The largest stake in S&P Global Inc. (NYSE:SPGI) was held by Egerton Capital Limited, which reported holding $736.1 million worth of stock at the end of March. It was followed by Cantillon Capital Management with a $644.6 million position. Other investors bullish on the company included Orbis Investment Management, Lone Pine Capital, and Citadel Investment Group.
As one would reasonably expect, specific money managers have jumped into S&P Global Inc. (NYSE:SPGI) headfirst. Iridian Asset Management, managed by David Cohen and Harold Levy, established the biggest position in S&P Global Inc. (NYSE:SPGI). Iridian Asset Management had $173.7 million invested in the company at the end of the quarter. Panayotis Takis Sparaggis's Alkeon Capital Management also initiated a $14.2 million position during the quarter. The other funds with new positions in the stock are Michael Kharitonov and Jon David McAuliffe's Voleon Capital, Stephen J. Errico's Locust Wood Capital Advisers, and James Dondero's Highland Capital Management.
Let's now review hedge fund activity in other stocks similar to S&P Global Inc. (NYSE:SPGI). We will take a look at Prudential Public Limited Company (NYSE:PUK), Ecolab Inc. (NYSE:ECL), The Blackstone Group Inc. (NYSE:BX), and DuPont de Nemours, Inc. (NYSE:DD). This group of stocks' market caps are similar to SPGI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PUK,5,40016,-1 ECL,27,2047954,0 BX,30,519284,-4 DD,42,1023646,-19 Average,26,907725,-6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $908 million. That figure was $4351 million in SPGI's case. DuPont de Nemours, Inc. (NYSE:DD) is the most popular stock in this table. On the other hand Prudential Public Limited Company (NYSE:PUK) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks S&P Global Inc. (NYSE:SPGI) is more popular among hedge funds. 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. Hedge funds were also right about betting on SPGI as the stock returned 7.8% during Q3 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.