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Hedge Funds Were A Bit Early Dumping IHS Markit Ltd. (INFO) Shares

Abigail Fisher

Does IHS Markit Ltd. (NYSE:INFO) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.

Is IHS Markit Ltd. (NYSE:INFO) ready to rally soon? The best stock pickers are selling. The number of long hedge fund positions were cut by 2 lately. Our calculations also showed that INFO 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.

5 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 40 percentage points since May 2014 through May 30, 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.

INFO_oct2019

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. We're going to view the latest hedge fund action regarding IHS Markit Ltd. (NYSE:INFO).

How are hedge funds trading IHS Markit Ltd. (NYSE:INFO)?

At Q2's end, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in INFO over the last 16 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Jeffrey Talpins Element Capital

According to Insider Monkey's hedge fund database, Robert Joseph Caruso's Select Equity Group has the biggest position in IHS Markit Ltd. (NYSE:INFO), worth close to $303.8 million, comprising 2.1% of its total 13F portfolio. Sitting at the No. 2 spot is Farallon Capital, which holds a $229.7 million position; the fund has 1.9% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions consist of Andrew Immerman and Jeremy Schiffman's Palestra Capital Management, David Thomas's Atalan Capital and Greg Poole's Echo Street Capital Management.

Seeing as IHS Markit Ltd. (NYSE:INFO) has witnessed declining sentiment from the entirety of the hedge funds we track, logic holds that there exists a select few hedge funds that decided to sell off their full holdings in the second quarter. Interestingly, John Overdeck and David Siegel's Two Sigma Advisors dropped the largest position of all the hedgies monitored by Insider Monkey, totaling close to $2 million in stock. James Dondero's fund, Highland Capital Management, also dropped its stock, about $1.1 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 2 funds in the second quarter.

Let's now review hedge fund activity in other stocks similar to IHS Markit Ltd. (NYSE:INFO). These stocks are Dollar Tree, Inc. (NASDAQ:DLTR), T. Rowe Price Group, Inc. (NASDAQ:TROW), Ventas, Inc. (NYSE:VTR), and Discover Financial Services (NYSE:DFS). This group of stocks' market values resemble INFO's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DLTR,49,2013841,1 TROW,30,330195,4 VTR,18,385834,-1 DFS,39,935868,3 Average,34,916435,1.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 34 hedge funds with bullish positions and the average amount invested in these stocks was $916 million. That figure was $998 million in INFO's case. Dollar Tree, Inc. (NASDAQ:DLTR) is the most popular stock in this table. On the other hand Ventas, Inc. (NYSE:VTR) is the least popular one with only 18 bullish hedge fund positions. IHS Markit Ltd. (NYSE:INFO) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on INFO, though not to the same extent, as the stock returned 5% during the third quarter and outperformed the market.

Disclosure: None. This article was originally published at Insider Monkey.

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