Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 817 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about International Flavors & Fragrances Inc (NYSE:IFF) in this article.
Is IFF a good stock to buy? International Flavors & Fragrances Inc (NYSE:IFF) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 31 hedge funds' portfolios at the end of September. Our calculations also showed that IFF isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare IFF to other stocks including Essex Property Trust Inc (NYSE:ESS), Logitech International SA (NASDAQ:LOGI), and 10x Genomics, Inc. (NASDAQ:TXG) to get a better sense of its popularity. Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 66 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Mario Gabelli of GAMCO Investors
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 website. With all of this in mind we're going to take a look at the latest hedge fund action surrounding International Flavors & Fragrances Inc (NYSE:IFF).
Do Hedge Funds Think IFF Is A Good Stock To Buy Now?
At Q3's end, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards IFF over the last 21 quarters. With the smart money's capital changing hands, there exists a select group of key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
Among these funds, GAMCO Investors held the most valuable stake in International Flavors & Fragrances Inc (NYSE:IFF), which was worth $41.8 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $31.5 million worth of shares. Citadel Investment Group, Renaissance Technologies, and Weiss Asset 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 Sandbar Asset Management allocated the biggest weight to International Flavors & Fragrances Inc (NYSE:IFF), around 2.34% of its 13F portfolio. Beech Hill Partners is also relatively very bullish on the stock, designating 1.63 percent of its 13F equity portfolio to IFF.
Because International Flavors & Fragrances Inc (NYSE:IFF) has faced bearish sentiment from the aggregate hedge fund industry, logic holds that there lies a certain "tier" of hedge funds that decided to sell off their positions entirely last quarter. Interestingly, Greg Poole's Echo Street Capital Management dropped the largest stake of all the hedgies tracked by Insider Monkey, totaling close to $22 million in stock. Highbridge Capital Management, also dropped its stock, about $6.3 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now take a look at hedge fund activity in other stocks similar to International Flavors & Fragrances Inc (NYSE:IFF). These stocks are Essex Property Trust Inc (NYSE:ESS), Logitech International SA (NASDAQ:LOGI), 10x Genomics, Inc. (NASDAQ:TXG), Masimo Corporation (NASDAQ:MASI), Avantor, Inc. (NYSE:AVTR), Telefonica Brasil SA (NYSE:VIV), and Expedia Group Inc (NASDAQ:EXPE). All of these stocks' market caps are closest to IFF's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ESS,28,549766,0 LOGI,15,406297,2 TXG,31,527141,12 MASI,27,171338,-5 AVTR,56,1405872,22 VIV,13,96138,1 EXPE,64,3787615,3 Average,33.4,992024,5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.4 hedge funds with bullish positions and the average amount invested in these stocks was $992 million. That figure was $203 million in IFF's case. Expedia Group Inc (NASDAQ:EXPE) is the most popular stock in this table. On the other hand Telefonica Brasil SA (NYSE:VIV) is the least popular one with only 13 bullish hedge fund positions. International Flavors & Fragrances Inc (NYSE:IFF) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for IFF is 52.6. 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. This is a slightly negative signal and 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and surpassed the market again by 16.4 percentage points. Unfortunately IFF wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); IFF investors were disappointed as the stock returned -6.7% since the end of September (through 12/18) 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.