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Is ICICI Bank Limited (IBN) Going to Burn These Hedge Funds?

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·5 min read
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In this article we will take a look at whether hedge funds think ICICI Bank Limited (NYSE:IBN) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

ICICI Bank Limited (NYSE:IBN) investors should be aware of a decrease in enthusiasm from smart money recently. ICICI Bank Limited (NYSE:IBN) was in 28 hedge funds' portfolios at the end of June. The all time high for this statistic is 34. There were 31 hedge funds in our database with IBN holdings at the end of March. Our calculations also showed that IBN isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Rajiv Jain of GQG Partners
Rajiv Jain of GQG Partners

At Insider Monkey, we scour multiple sources to uncover 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 EV 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. Now we're going to analyze the new hedge fund action surrounding ICICI Bank Limited (NYSE:IBN).

Do Hedge Funds Think IBN Is A Good Stock To Buy Now?

Heading into the third quarter of 2021, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in IBN over the last 24 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is IBN A Good Stock To Buy?
Is IBN A Good Stock To Buy?

Among these funds, Lone Pine Capital held the most valuable stake in ICICI Bank Limited (NYSE:IBN), which was worth $738 million at the end of the second quarter. On the second spot was GQG Partners which amassed $424.9 million worth of shares. Viking Global, Samlyn Capital, and Alua Capital Management were 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 Dalton Investments allocated the biggest weight to ICICI Bank Limited (NYSE:IBN), around 19.6% of its 13F portfolio. Alua Capital Management is also relatively very bullish on the stock, earmarking 10.96 percent of its 13F equity portfolio to IBN.

Seeing as ICICI Bank Limited (NYSE:IBN) has experienced declining sentiment from the smart money, it's easy to see that there exists a select few fund managers who were dropping their positions entirely in the second quarter. Intriguingly, Patrick Degorce's Theleme Partners sold off the largest stake of the 750 funds monitored by Insider Monkey, comprising close to $89.9 million in stock. David Kowitz and Sheldon Kasowitz's fund, Indus Capital, also dumped its stock, about $14.7 million worth. These transactions are interesting, as total hedge fund interest fell by 3 funds in the second quarter.

Let's check out hedge fund activity in other stocks similar to ICICI Bank Limited (NYSE:IBN). These stocks are Waste Management, Inc. (NYSE:WM), Eaton Corporation plc (NYSE:ETN), Workday Inc (NYSE:WDAY), Itau Unibanco Holding SA (NYSE:ITUB), Ecolab Inc. (NYSE:ECL), Northrop Grumman Corporation (NYSE:NOC), and DoorDash, Inc. (NYSE:DASH). All of these stocks' market caps match IBN's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WM,39,3600334,7 ETN,40,1062179,-9 WDAY,72,5187481,3 ITUB,16,431689,4 ECL,48,2773469,6 NOC,42,1053366,2 DASH,45,8924479,7 Average,43.1,3290428,2.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 43.1 hedge funds with bullish positions and the average amount invested in these stocks was $3290 million. That figure was $2474 million in IBN's case. Workday Inc (NYSE:WDAY) is the most popular stock in this table. On the other hand Itau Unibanco Holding SA (NYSE:ITUB) is the least popular one with only 16 bullish hedge fund positions. ICICI Bank Limited (NYSE:IBN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for IBN is 37.4. 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 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. A small number of hedge funds were also right about betting on IBN as the stock returned 14.1% since the end of the second quarter (through 10/15) and outperformed the market by an even larger margin.

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