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.
INTL Fcstone Inc (NASDAQ:INTL) was in 13 hedge funds' portfolios at the end of December. INTL has experienced an increase in support from the world's most elite money managers recently. There were 10 hedge funds in our database with INTL positions at the end of the previous quarter. Our calculations also showed that INTL isn't among the 30 most popular stocks among hedge funds.
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' 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 32 percentage points since May 2014 through March 12, 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.
Let's take a look at the key hedge fund action regarding INTL Fcstone Inc (NASDAQ:INTL).
How have hedgies been trading INTL Fcstone Inc (NASDAQ:INTL)?
Heading into the first quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 30% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in INTL over the last 14 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Private Capital Management, managed by Gregg J. Powers, holds the largest position in INTL Fcstone Inc (NASDAQ:INTL). Private Capital Management has a $26.2 million position in the stock, comprising 4.4% of its 13F portfolio. On Private Capital Management's heels is Jeffrey Bronchick of Cove Street Capital, with a $21.6 million position; 2.8% of its 13F portfolio is allocated to the company. Other members of the smart money with similar optimism include Brian Bares, Russell Mollen, and James Bradshaw's Nine Ten Partners, Chuck Royce's Royce & Associates and Jim Simons's Renaissance Technologies.
As industrywide interest jumped, key money managers were breaking ground themselves. PEAK6 Capital Management, managed by Matthew Hulsizer, established the biggest position in INTL Fcstone Inc (NASDAQ:INTL). PEAK6 Capital Management had $0.3 million invested in the company at the end of the quarter. Peter Muller's PDT Partners also made a $0.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Andrew Feldstein and Stephen Siderow's Blue Mountain Capital, Matthew Hulsizer's PEAK6 Capital Management, and Gavin Saitowitz and Cisco J. del Valle's Springbok Capital.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as INTL Fcstone Inc (NASDAQ:INTL) but similarly valued. We will take a look at Victory Capital Holdings, Inc. (NASDAQ:VCTR), Hersha Hospitality Trust (NYSE:HT), Sohu.com Limited (NASDAQ:SOHU), and Cerus Corporation (NASDAQ:CERS). This group of stocks' market values are similar to INTL's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VCTR,10,42034,0 HT,13,36672,5 SOHU,10,93208,-1 CERS,15,90900,-3 Average,12,65704,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $66 million. That figure was $74 million in INTL's case. Cerus Corporation (NASDAQ:CERS) is the most popular stock in this table. On the other hand Victory Capital Holdings, Inc. (NASDAQ:VCTR) is the least popular one with only 10 bullish hedge fund positions. INTL Fcstone Inc (NASDAQ:INTL) 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately INTL wasn't nearly as popular as these 15 stock and hedge funds that were betting on INTL were disappointed as the stock returned 8.6% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.