Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That's why we weren't surprised when hedge funds’ top 20 large-cap stock picks generated a return of 24.4% during the first 9 months of 2019 and outperformed the broader market benchmark by 4 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Is INTL Fcstone Inc (NASDAQ:INTL) going to take off soon? Investors who are in the know are becoming less hopeful. The number of long hedge fund positions dropped by 4 in recent months. Our calculations also showed that INTL isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To most shareholders, hedge funds are viewed as underperforming, old financial tools of years past. While there are over 8000 funds with their doors open at the moment, Our researchers hone in on the top tier of this group, approximately 750 funds. These investment experts oversee the majority of all hedge funds' total capital, and by observing their highest performing picks, Insider Monkey has found numerous investment strategies that have historically exceeded Mr. Market. Insider Monkey's flagship hedge fund strategy outpaced the S&P 500 index by around 5 percentage points annually since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, 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 take a gander at the key hedge fund action surrounding INTL Fcstone Inc (NASDAQ:INTL).
How are hedge funds trading INTL Fcstone Inc (NASDAQ:INTL)?
At the end of the second quarter, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -27% from the first quarter of 2019. By comparison, 8 hedge funds held shares or bullish call options in INTL a year ago. With hedge funds' sentiment swirling, there exists an "upper tier" of key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
Among these funds, Private Capital Management held the most valuable stake in INTL Fcstone Inc (NASDAQ:INTL), which was worth $29.4 million at the end of the second quarter. On the second spot was Nine Ten Partners which amassed $23.5 million worth of shares. Moreover, Cove Street Capital, Royce & Associates, and Renaissance Technologies were also bullish on INTL Fcstone Inc (NASDAQ:INTL), allocating a large percentage of their portfolios to this stock.
Since INTL Fcstone Inc (NASDAQ:INTL) has faced falling interest from hedge fund managers, we can see that there is a sect of fund managers who were dropping their entire stakes in the second quarter. It's worth mentioning that Israel Englander's Millennium Management dumped the biggest investment of all the hedgies monitored by Insider Monkey, comprising close to $0.7 million in stock, and Matthew Hulsizer's PEAK6 Capital Management was right behind this move, as the fund sold off about $0.5 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 4 funds in the second quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as INTL Fcstone Inc (NASDAQ:INTL) but similarly valued. We will take a look at Omeros Corporation (NASDAQ:OMER), Speedway Motorsports, Inc. (NYSE:TRK), Grupo Supervielle S.A. (NYSE:SUPV), and Celestica Inc. (NYSE:CLS). All of these stocks' market caps match INTL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position OMER,8,98181,2 TRK,9,23289,0 SUPV,7,35642,-5 CLS,12,61125,-3 Average,9,54559,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $55 million. That figure was $84 million in INTL's case. Celestica Inc. (NYSE:CLS) is the most popular stock in this table. On the other hand Grupo Supervielle S.A. (NYSE:SUPV) is the least popular one with only 7 bullish hedge fund positions. INTL Fcstone Inc (NASDAQ:INTL) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on INTL, though not to the same extent, as the stock returned 3.7% during the third quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.