Is International Flavors & Fragrances Inc (NYSE:IFF) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
International Flavors & Fragrances Inc (NYSE:IFF) was in 18 hedge funds' portfolios at the end of the second quarter of 2019. IFF has experienced an increase in support from the world's most elite money managers lately. There were 16 hedge funds in our database with IFF positions at the end of the previous quarter. Our calculations also showed that IFF isn't among the 30 most popular stocks among hedge funds.
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 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
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. Let's check out the fresh hedge fund action surrounding International Flavors & Fragrances Inc (NYSE:IFF).
What have hedge funds been doing with International Flavors & Fragrances Inc (NYSE:IFF)?
At Q2's end, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from one quarter earlier. On the other hand, there were a total of 21 hedge funds with a bullish position in IFF a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in International Flavors & Fragrances Inc (NYSE:IFF) was held by Sirios Capital Management, which reported holding $89 million worth of stock at the end of March. It was followed by GAMCO Investors with a $78.6 million position. Other investors bullish on the company included Citadel Investment Group, Citadel Investment Group, and Markel Gayner Asset Management.
Now, some big names have jumped into International Flavors & Fragrances Inc (NYSE:IFF) headfirst. Highland Capital Management, managed by James Dondero, established the most outsized position in International Flavors & Fragrances Inc (NYSE:IFF). Highland Capital Management had $3 million invested in the company at the end of the quarter. Brandon Haley's Holocene Advisors also initiated a $2 million position during the quarter. The other funds with brand new IFF positions are D. E. Shaw's D E Shaw, Alec Litowitz and Ross Laser's Magnetar Capital, and Ian Simm's Impax Asset Management.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as International Flavors & Fragrances Inc (NYSE:IFF) but similarly valued. We will take a look at Broadridge Financial Solutions, Inc. (NYSE:BR), Garmin Ltd. (NASDAQ:GRMN), Arch Capital Group Ltd. (NASDAQ:ACGL), and EXACT Sciences Corporation (NASDAQ:EXAS). All of these stocks' market caps resemble IFF's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BR,21,254023,-5 GRMN,32,456384,5 ACGL,23,1291283,11 EXAS,32,837125,-1 Average,27,709704,2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $710 million. That figure was $223 million in IFF's case. Garmin Ltd. (NASDAQ:GRMN) is the most popular stock in this table. On the other hand Broadridge Financial Solutions, Inc. (NYSE:BR) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks International Flavors & Fragrances Inc (NYSE:IFF) is even less popular than BR. Hedge funds dodged a bullet by taking a bearish stance towards IFF. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately IFF wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); IFF investors were disappointed as the stock returned -14.9% during the third quarter 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 (view the video below) among hedge funds as many of these stocks already outperformed the market so far in 2019. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.