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Were Hedge Funds Right About Piling Into Ingersoll-Rand Plc (IR)?

Abigail Fisher

Ingersoll-Rand Plc (NYSE:IR) was in 43 hedge funds' portfolios at the end of the fourth quarter of 2018. IR investors should be aware of an increase in enthusiasm from smart money recently. There were 42 hedge funds in our database with IR positions at the end of the previous quarter. Our calculations also showed that IR isn't among the 30 most popular stocks among hedge funds.

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 market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

David Blood

We're going to review the recent hedge fund action regarding Ingersoll-Rand Plc (NYSE:IR).

How are hedge funds trading Ingersoll-Rand Plc (NYSE:IR)?

At Q4's end, a total of 43 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 2% from one quarter earlier. On the other hand, there were a total of 36 hedge funds with a bullish position in IR 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.

IR_mar2019

Among these funds, Generation Investment Management held the most valuable stake in Ingersoll-Rand Plc (NYSE:IR), which was worth $313.3 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $154 million worth of shares. Moreover, Two Sigma Advisors, Millennium Management, and Alyeska Investment Group were also bullish on Ingersoll-Rand Plc (NYSE:IR), allocating a large percentage of their portfolios to this stock.

Now, key hedge funds have been driving this bullishness. Gotham Asset Management, managed by Joel Greenblatt, initiated the biggest position in Ingersoll-Rand Plc (NYSE:IR). Gotham Asset Management had $26.1 million invested in the company at the end of the quarter. Bain Capital's Brookside Capital also initiated a $3.3 million position during the quarter. The other funds with new positions in the stock are Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners, Hoon Kim's Quantinno Capital, and Minhua Zhang's Weld Capital Management.

Let's now take a look at hedge fund activity in other stocks similar to Ingersoll-Rand Plc (NYSE:IR). These stocks are T. Rowe Price Group, Inc. (NASDAQ:TROW), ONEOK, Inc. (NYSE:OKE), Anadarko Petroleum Corporation (NYSE:APC), and Digital Realty Trust, Inc. (NYSE:DLR). This group of stocks' market values are similar to IR's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TROW,22,290370,5 OKE,26,471015,-5 APC,54,1760662,9 DLR,23,268314,-11 Average,31.25,697590,-0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.25 hedge funds with bullish positions and the average amount invested in these stocks was $698 million. That figure was $1478 million in IR's case. Anadarko Petroleum Corporation (NYSE:APC) is the most popular stock in this table. On the other hand T. Rowe Price Group, Inc. (NASDAQ:TROW) is the least popular one with only 22 bullish hedge fund positions. Ingersoll-Rand Plc (NYSE:IR) is not the most popular stock in this group but hedge fund interest is still above average and sits at its all time high. 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 IR, though not to the same extent, as the stock returned 16.9% and outperformed the market as well.

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

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