We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like ICC Holdings, Inc. (NASDAQ:ICCH).
Hedge fund interest in ICC Holdings, Inc. (NASDAQ:ICCH) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare ICCH to other stocks including Pintec Technology Holdings Limited (NASDAQ:PT), Rekor Systems, Inc. (NASDAQ:REKR), and StoneMor Partners L.P. (NYSE:STON) to get a better sense of its popularity. Video: Click the image to 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 has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_758440" align="aligncenter" width="450"] Michael Price of MFP Investors[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Keeping this in mind let's take a glance at the latest hedge fund action surrounding ICC Holdings, Inc. (NASDAQ:ICCH).
What have hedge funds been doing with ICC Holdings, Inc. (NASDAQ:ICCH)?
At Q3's end, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards ICCH over the last 17 quarters. With hedgies' capital changing hands, there exists an "upper tier" of key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
More specifically, MFP Investors was the largest shareholder of ICC Holdings, Inc. (NASDAQ:ICCH), with a stake worth $0.7 million reported as of the end of September. Trailing MFP Investors was Minerva Advisors, which amassed a stake valued at $0.4 million. Arbiter Partners Capital Management was 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 Minerva Advisors allocated the biggest weight to ICC Holdings, Inc. (NASDAQ:ICCH), around 0.22% of its 13F portfolio. MFP Investors is also relatively very bullish on the stock, setting aside 0.09 percent of its 13F equity portfolio to ICCH.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as ICC Holdings, Inc. (NASDAQ:ICCH) but similarly valued. These stocks are Pintec Technology Holdings Limited (NASDAQ:PT), Rekor Systems, Inc. (NASDAQ:REKR), StoneMor Partners L.P. (NYSE:STON), and Reed's, Inc. (NASDAQ:REED). This group of stocks' market values match ICCH's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PT,1,17,0 REKR,1,46,0 STON,2,13571,0 REED,3,973,0 Average,1.75,3652,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 1.75 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $1 million in ICCH's case. Reed's, Inc. (NASDAQ:REED) is the most popular stock in this table. On the other hand Pintec Technology Holdings Limited (NASDAQ:PT) is the least popular one with only 1 bullish hedge fund positions. ICC Holdings, Inc. (NASDAQ:ICCH) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately ICCH wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ICCH were disappointed as the stock returned -1.4% during the fourth quarter (through the end of November) 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 this year.
Disclosure: None. This article was originally published at Insider Monkey.