Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of the third quarter of 2018 as investors first worried over the possible ramifications of rising interest rates and the escalation of the trade war with China. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only about 60% S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Irsa Inversiones y Rprsntcins SA (NYSE:IRS) and see how the stock is affected by the recent hedge fund activity.
Irsa Inversiones y Rprsntcins SA (NYSE:IRS) was in 10 hedge funds' portfolios at the end of September. IRS investors should pay attention to an increase in enthusiasm from smart money recently. There were 6 hedge funds in our database with IRS positions at the end of the previous quarter. Our calculations also showed that IRS 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_27480" align="alignnone" width="600"] Israel Englander of Millennium Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. We're going to take a gander at the new hedge fund action surrounding Irsa Inversiones y Rprsntcins SA (NYSE:IRS).
What does smart money think about Irsa Inversiones y Rprsntcins SA (NYSE:IRS)?
At Q3's end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 67% from one quarter earlier. On the other hand, there were a total of 10 hedge funds with a bullish position in IRS a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Autonomy Capital held the most valuable stake in Irsa Inversiones y Rprsntcins SA (NYSE:IRS), which was worth $14.2 million at the end of the third quarter. On the second spot was 683 Capital Partners which amassed $4.8 million worth of shares. Serengeti Asset Management, Centerbridge Partners, and Brigade Capital 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 Autonomy Capital allocated the biggest weight to Irsa Inversiones y Rprsntcins SA (NYSE:IRS), around 8.12% of its 13F portfolio. Serengeti Asset Management is also relatively very bullish on the stock, designating 0.69 percent of its 13F equity portfolio to IRS.
As aggregate interest increased, key hedge funds have been driving this bullishness. Centerbridge Partners, managed by Mark T. Gallogly, established the largest position in Irsa Inversiones y Rprsntcins SA (NYSE:IRS). Centerbridge Partners had $1.3 million invested in the company at the end of the quarter. Israel Englander's Millennium Management also made a $0.5 million investment in the stock during the quarter. The other funds with brand new IRS positions are Renaissance Technologies, Paul Marshall and Ian Wace's Marshall Wace, and Matthew Tewksbury's Stevens Capital Management.
Let's check out hedge fund activity in other stocks similar to Irsa Inversiones y Rprsntcins SA (NYSE:IRS). These stocks are BlueLinx Holdings Inc. (NYSE:BXC), Covenant Transportation Group, Inc. (NASDAQ:CVTI), Investors Title Company (NASDAQ:ITIC), and NN, Inc. (NASDAQ:NNBR). This group of stocks' market caps resemble IRS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BXC,9,127445,2 CVTI,11,19949,-3 ITIC,4,38476,1 NNBR,5,36968,-1 Average,7.25,55710,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $56 million. That figure was $24 million in IRS's case. Covenant Transportation Group, Inc. (NASDAQ:CVTI) is the most popular stock in this table. On the other hand Investors Title Company (NASDAQ:ITIC) is the least popular one with only 4 bullish hedge fund positions. Irsa Inversiones y Rprsntcins SA (NYSE:IRS) 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 IRS wasn't nearly as popular as these 20 stocks and hedge funds that were betting on IRS were disappointed as the stock returned 5.9% 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.