Was The Smart Money Right About S&P Global Inc. (SPGI)?
While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding S&P Global Inc. (NYSE:SPGI).
S&P Global Inc. (NYSE:SPGI) was in 75 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 76. SPGI shareholders have witnessed an increase in hedge fund sentiment in recent months. There were 71 hedge funds in our database with SPGI holdings at the end of September. Our calculations also showed that SPGI isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).
William Von Mueffling of Cantillon Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind let's take a gander at the key hedge fund action regarding S&P Global Inc. (NYSE:SPGI).
Do Hedge Funds Think SPGI Is A Good Stock To Buy Now?
At Q4's end, a total of 75 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SPGI over the last 22 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.
The largest stake in S&P Global Inc. (NYSE:SPGI) was held by Cantillon Capital Management, which reported holding $853.3 million worth of stock at the end of December. It was followed by Third Point with a $295.9 million position. Other investors bullish on the company included Renaissance Technologies, Valley Forge Capital, and Melvin Capital Management. In terms of the portfolio weights assigned to each position Rings Capital Management allocated the biggest weight to S&P Global Inc. (NYSE:SPGI), around 43.81% of its 13F portfolio. Valley Forge Capital is also relatively very bullish on the stock, designating 19.71 percent of its 13F equity portfolio to SPGI.
Now, key money managers have jumped into S&P Global Inc. (NYSE:SPGI) headfirst. Melvin Capital Management, managed by Gabriel Plotkin, established the biggest position in S&P Global Inc. (NYSE:SPGI). Melvin Capital Management had $147.9 million invested in the company at the end of the quarter. Brandon Haley's Holocene Advisors also initiated a $117.3 million position during the quarter. The other funds with new positions in the stock are Ken Griffin's Citadel Investment Group, Jeff Lignelli's Incline Global Management, and Anand Parekh's Alyeska Investment Group.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as S&P Global Inc. (NYSE:SPGI) but similarly valued. These stocks are Applied Materials, Inc. (NASDAQ:AMAT), Zoetis Inc (NYSE:ZTS), Canadian National Railway Company (NYSE:CNI), Altria Group Inc (NYSE:MO), Fiserv, Inc. (NASDAQ:FISV), NIO Inc. (NYSE:NIO), and Automatic Data Processing, Inc. (NASDAQ:ADP). All of these stocks' market caps resemble SPGI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AMAT,61,3632227,2 ZTS,61,2389697,3 CNI,31,2188963,5 MO,37,1082661,-10 FISV,94,5178126,4 NIO,34,2634013,-1 ADP,48,3064769,6 Average,52.3,2881494,1.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 52.3 hedge funds with bullish positions and the average amount invested in these stocks was $2881 million. That figure was $3808 million in SPGI's case. Fiserv, Inc. (NASDAQ:FISV) is the most popular stock in this table. On the other hand Canadian National Railway Company (NYSE:CNI) is the least popular one with only 31 bullish hedge fund positions. S&P Global Inc. (NYSE:SPGI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SPGI is 73.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. Hedge funds were also right about betting on SPGI as the stock returned 14.8% since the end of Q4 (through 4/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
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