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Were Hedge Funds Right About Intuit Inc. (INTU)?

Abigail Fisher
·6 min read

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 823 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Intuit Inc. (NASDAQ:INTU) in this article.

Intuit Inc. (NASDAQ:INTU) has experienced a decrease in activity from the world's largest hedge funds of late. Intuit Inc. (NASDAQ:INTU) was in 53 hedge funds' portfolios at the end of June. The all time high for this statistics is 55. Our calculations also showed that INTU isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.

To most stock holders, hedge funds are perceived as underperforming, outdated investment tools of the past. While there are greater than 8000 funds in operation today, Our researchers look at the bigwigs of this club, about 850 funds. Most estimates calculate that this group of people handle the majority of the hedge fund industry's total asset base, and by paying attention to their finest stock picks, Insider Monkey has figured out many investment strategies that have historically defeated the market. Insider Monkey's flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Third Point 2014 Q3 Investor Letter
Third Point 2014 Q3 Investor Letter

Dan Loeb of Third Point

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 to get excerpts of these letters in your inbox. Keeping this in mind we're going to take a look at the recent hedge fund action surrounding Intuit Inc. (NASDAQ:INTU).

How are hedge funds trading Intuit Inc. (NASDAQ:INTU)?

At Q2's end, a total of 53 of the hedge funds tracked by Insider Monkey were long this stock, a change of -2% from the previous quarter. On the other hand, there were a total of 46 hedge funds with a bullish position in INTU a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

The largest stake in Intuit Inc. (NASDAQ:INTU) was held by AQR Capital Management, which reported holding $380.4 million worth of stock at the end of September. It was followed by GQG Partners with a $235.3 million position. Other investors bullish on the company included GLG Partners, Arrowstreet Capital, and Echo Street Capital Management. In terms of the portfolio weights assigned to each position Blue Whale Capital allocated the biggest weight to Intuit Inc. (NASDAQ:INTU), around 6.18% of its 13F portfolio. Bristol Gate Capital Partners is also relatively very bullish on the stock, designating 4.58 percent of its 13F equity portfolio to INTU.

Since Intuit Inc. (NASDAQ:INTU) has witnessed bearish sentiment from the smart money, logic holds that there exists a select few hedge funds that elected to cut their full holdings in the second quarter. It's worth mentioning that Robert Joseph Caruso's Select Equity Group dropped the largest position of the "upper crust" of funds followed by Insider Monkey, comprising an estimated $33.7 million in stock. Israel Englander's fund, Millennium Management, also dropped its stock, about $18.3 million worth. These moves are interesting, as total hedge fund interest was cut by 1 funds in the second quarter.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Intuit Inc. (NASDAQ:INTU) but similarly valued. We will take a look at ServiceNow Inc (NYSE:NOW), American Express Company (NYSE:AXP), Morgan Stanley (NYSE:MS), Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF), Mondelez International Inc (NASDAQ:MDLZ), and Altria Group Inc (NYSE:MO). This group of stocks' market values match INTU's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NOW,86,4949673,1 AXP,54,17635296,-3 MS,61,4357171,-9 VRTX,54,3477688,-2 KOF,5,358015,-2 MDLZ,54,2594722,0 MO,43,1289543,-3 Average,51,4951730,-2.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 51 hedge funds with bullish positions and the average amount invested in these stocks was $4952 million. That figure was $1735 million in INTU's case. ServiceNow Inc (NYSE:NOW) is the most popular stock in this table. On the other hand Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF) is the least popular one with only 5 bullish hedge fund positions. Intuit Inc. (NASDAQ:INTU) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for INTU is 62.5. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 30% in 2020 through October 23rd and still beat the market by 21 percentage points. Hedge funds were also right about betting on INTU, though not to the same extent, as the stock returned 13.3% since Q2 (through October 23rd) and outperformed the market as well.

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Disclosure: None. This article was originally published at Insider Monkey.

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