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Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about IQVIA Holdings, Inc. (NYSE:IQV).
Is IQVIA Holdings, Inc. (NYSE:IQV) a bargain? The best stock pickers were selling. The number of long hedge fund positions were cut by 7 recently. IQVIA Holdings, Inc. (NYSE:IQV) was in 62 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 69. Our calculations also showed that IQV isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 69 hedge funds in our database with IQV holdings at the end of December.
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 S&P 500 ETFs by 115 percentage points since March 2017 (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.
William Von Mueffling of Cantillon Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let's take a peek at the new hedge fund action regarding IQVIA Holdings, Inc. (NYSE:IQV).
Do Hedge Funds Think IQV Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 62 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in IQV over the last 23 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Farallon Capital, holds the largest position in IQVIA Holdings, Inc. (NYSE:IQV). Farallon Capital has a $785.9 million position in the stock, comprising 4.4% of its 13F portfolio. On Farallon Capital's heels is Steadfast Capital Management, led by Robert Pitts, holding a $361.6 million position; the fund has 3.8% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions contain Dan Loeb's Third Point, Ian Simm's Impax Asset Management and William von Mueffling's Cantillon Capital Management. In terms of the portfolio weights assigned to each position Cowbird Capital allocated the biggest weight to IQVIA Holdings, Inc. (NYSE:IQV), around 10.56% of its 13F portfolio. Brahman Capital is also relatively very bullish on the stock, designating 6.3 percent of its 13F equity portfolio to IQV.
Since IQVIA Holdings, Inc. (NYSE:IQV) has witnessed declining sentiment from the smart money, it's easy to see that there was a specific group of hedgies who were dropping their full holdings by the end of the first quarter. It's worth mentioning that Steve Cohen's Point72 Asset Management dropped the largest position of the "upper crust" of funds monitored by Insider Monkey, totaling an estimated $83.2 million in stock, and Robert Pohly's Samlyn Capital was right behind this move, as the fund said goodbye to about $41.7 million worth. These transactions are important to note, as total hedge fund interest dropped by 7 funds by the end of the first quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as IQVIA Holdings, Inc. (NYSE:IQV) but similarly valued. These stocks are CRH PLC (NYSE:CRH), Mizuho Financial Group Inc. (NYSE:MFG), Carrier Global Corporation (NYSE:CARR), Canadian Natural Resources Limited (NYSE:CNQ), Match Group, Inc. (NASDAQ:MTCH), Southwest Airlines Co. (NYSE:LUV), and Prudential Financial Inc (NYSE:PRU). This group of stocks' market caps resemble IQV's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CRH,9,165990,2 MFG,5,15835,0 CARR,51,2166831,-1 CNQ,29,528873,0 MTCH,68,2938465,-4 LUV,52,747041,-3 PRU,37,634521,1 Average,35.9,1028222,-0.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.9 hedge funds with bullish positions and the average amount invested in these stocks was $1028 million. That figure was $3684 million in IQV's case. Match Group, Inc. (NASDAQ:MTCH) is the most popular stock in this table. On the other hand Mizuho Financial Group Inc. (NYSE:MFG) is the least popular one with only 5 bullish hedge fund positions. IQVIA Holdings, Inc. (NYSE:IQV) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for IQV is 70.2. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. Hedge funds were also right about betting on IQV as the stock returned 26% since the end of Q1 (through 6/11) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.