Is InterXion Holding NV (NYSE:INXN) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is InterXion Holding NV (NYSE:INXN) worth your attention right now? The best stock pickers are taking a bearish view. The number of bullish hedge fund positions fell by 5 in recent months. Our calculations also showed that INXN isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to 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 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
[caption id="attachment_26575" align="aligncenter" width="600"] Louis Bacon Moore of Moore Capital[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to check out the key hedge fund action surrounding InterXion Holding NV (NYSE:INXN).
What does smart money think about InterXion Holding NV (NYSE:INXN)?
At the end of the third quarter, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -15% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards INXN over the last 17 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Echo Street Capital Management, managed by Greg Poole, holds the number one position in InterXion Holding NV (NYSE:INXN). Echo Street Capital Management has a $133.8 million position in the stock, comprising 2.3% of its 13F portfolio. Coming in second is Ricky Sandler of Eminence Capital, with a $102.8 million position; the fund has 1.2% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism include Josh Resnick's Jericho Capital Asset Management, Barry Lebovits and Joshua Kuntz's Rivulet Capital and Louis Bacon's Moore Global Investments. In terms of the portfolio weights assigned to each position SkyTop Capital Management allocated the biggest weight to InterXion Holding NV (NYSE:INXN), around 11.14% of its portfolio. Rivulet Capital is also relatively very bullish on the stock, setting aside 6.96 percent of its 13F equity portfolio to INXN.
Judging by the fact that InterXion Holding NV (NYSE:INXN) has faced bearish sentiment from the aggregate hedge fund industry, we can see that there were a few money managers that elected to cut their entire stakes last quarter. It's worth mentioning that Ken Griffin's Citadel Investment Group dumped the biggest investment of the "upper crust" of funds watched by Insider Monkey, worth an estimated $36.7 million in stock, and Jeffrey Talpins's Element Capital Management was right behind this move, as the fund said goodbye to about $3.2 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 5 funds last quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as InterXion Holding NV (NYSE:INXN) but similarly valued. These stocks are PRA Health Sciences Inc (NASDAQ:PRAH), Arrow Electronics, Inc. (NYSE:ARW), Unum Group (NYSE:UNM), and Knight-Swift Transportation Holdings Inc. (NYSE:KNX). This group of stocks' market caps match INXN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PRAH,31,588717,6 ARW,22,536478,5 UNM,23,474210,-2 KNX,22,303434,-1 Average,24.5,475710,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $476 million. That figure was $656 million in INXN's case. PRA Health Sciences Inc (NASDAQ:PRAH) is the most popular stock in this table. On the other hand Arrow Electronics, Inc. (NYSE:ARW) is the least popular one with only 22 bullish hedge fund positions. InterXion Holding NV (NYSE:INXN) 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 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately INXN wasn't nearly as popular as these 20 stocks and hedge funds that were betting on INXN were disappointed as the stock returned 4.4% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.