Billionaire hedge fund managers such as David Abrams, Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
Hedge fund interest in S&P Global Inc. (NYSE:SPGI) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Ecolab Inc. (NYSE:ECL), Northrop Grumman Corporation (NYSE:NOC), and Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) to gather more data points.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let's check out the fresh hedge fund action regarding S&P Global Inc. (NYSE:SPGI).
How are hedge funds trading S&P Global Inc. (NYSE:SPGI)?
Heading into the first quarter of 2019, a total of 54 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2018. On the other hand, there were a total of 51 hedge funds with a bullish position in SPGI a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Egerton Capital Limited held the most valuable stake in S&P Global Inc. (NYSE:SPGI), which was worth $511.5 million at the end of the third quarter. On the second spot was Cantillon Capital Management which amassed $492.9 million worth of shares. Moreover, D E Shaw, Iridian Asset Management, and Renaissance Technologies were also bullish on S&P Global Inc. (NYSE:SPGI), allocating a large percentage of their portfolios to this stock.
Because S&P Global Inc. (NYSE:SPGI) has experienced declining sentiment from hedge fund managers, it's easy to see that there exists a select few funds that elected to cut their full holdings last quarter. Interestingly, Principal Global Investors's Columbus Circle Investors said goodbye to the largest position of the "upper crust" of funds watched by Insider Monkey, valued at an estimated $28.6 million in call options. Jeff Lignelli's fund, Incline Global Management, also said goodbye to its call options, about $17.5 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's also examine hedge fund activity in other stocks similar to S&P Global Inc. (NYSE:SPGI). These stocks are Ecolab Inc. (NYSE:ECL), Northrop Grumman Corporation (NYSE:NOC), Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), and FedEx Corporation (NYSE:FDX). This group of stocks' market valuations match SPGI's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ECL,27,1832310,4 NOC,29,644842,-4 VRTX,39,2270792,-2 FDX,41,2195802,-1 Average,34,1735937,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 34 hedge funds with bullish positions and the average amount invested in these stocks was $1736 million. That figure was $2921 million in SPGI's case. FedEx Corporation (NYSE:FDX) is the most popular stock in this table. On the other hand Ecolab Inc. (NYSE:ECL) is the least popular one with only 27 bullish hedge fund positions. Compared to these stocks S&P Global Inc. (NYSE:SPGI) is more popular among hedge funds. Hedge funds are clearly very bullish about the stock and were rewarded for their stance. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Hedge funds were also right about betting on SPGI as the stock returned 19.9% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.