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Ingersoll Rand Inc. (IR): Are Hedge Funds Right About This Stock?

Asma UL Husna

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Ingersoll Rand Inc. (NYSE:IR) based on those filings.

Ingersoll Rand Inc. (NYSE:IR) investors should pay attention to a decrease in activity from the world's largest hedge funds of late. Our calculations also showed that IR isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 51 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_26082" align="aligncenter" width="399"] Andreas Halvorsen of Viking Global[/caption]

Andreas Halvorsen

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020's unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to go over the new hedge fund action surrounding Ingersoll Rand Inc. (NYSE:IR).

How are hedge funds trading Ingersoll Rand Inc. (NYSE:IR)?

Heading into the second quarter of 2020, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of -30% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in IR over the last 18 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

Among these funds, Viking Global held the most valuable stake in Ingersoll Rand Inc. (NYSE:IR), which was worth $297.9 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $45 million worth of shares. Millennium Management, Goodnow Investment Group, and D E Shaw 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 Goodnow Investment Group allocated the biggest weight to Ingersoll Rand Inc. (NYSE:IR), around 5.67% of its 13F portfolio. Sandbar Asset Management is also relatively very bullish on the stock, earmarking 2.92 percent of its 13F equity portfolio to IR.

Judging by the fact that Ingersoll Rand Inc. (NYSE:IR) has faced declining sentiment from the aggregate hedge fund industry, logic holds that there lies a certain "tier" of funds who were dropping their positions entirely heading into Q4. It's worth mentioning that David Blood and Al Gore's Generation Investment Management dumped the largest stake of all the hedgies monitored by Insider Monkey, valued at about $333.1 million in stock. Ian Simm's fund, Impax Asset Management, also dropped its stock, about $140 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 14 funds heading into Q4.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Ingersoll Rand Inc. (NYSE:IR) but similarly valued. We will take a look at CenturyLink, Inc. (NYSE:CTL), Brown & Brown, Inc. (NYSE:BRO), EPAM Systems Inc (NYSE:EPAM), and Hess Corporation (NYSE:HES). All of these stocks' market caps are closest to IR's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CTL,34,774832,0 BRO,26,585823,3 EPAM,27,338859,-1 HES,28,253381,-6 Average,28.75,488224,-1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.75 hedge funds with bullish positions and the average amount invested in these stocks was $488 million. That figure was $490 million in IR's case. CenturyLink, Inc. (NYSE:CTL) is the most popular stock in this table. On the other hand Brown & Brown, Inc. (NYSE:BRO) is the least popular one with only 26 bullish hedge fund positions. Ingersoll Rand Inc. (NYSE:IR) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but beat the market by 13.2 percentage points. Unfortunately IR wasn't nearly as popular as these 10 stocks and hedge funds that were betting on IR were disappointed as the stock returned 13.7% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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

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