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Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in World Fuel Services Corporation (NYSE:INT)? The smart money sentiment can provide an answer to this question.
World Fuel Services Corporation (NYSE:INT) investors should pay attention to a decrease in hedge fund interest of late. World Fuel Services Corporation (NYSE:INT) was in 16 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 24. Our calculations also showed that INT isn't among the 30 most popular stocks among hedge funds (click for Q3 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Joel Greenblatt of Gotham Asset Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Keeping this in mind we're going to review the key hedge fund action surrounding World Fuel Services Corporation (NYSE:INT).
Do Hedge Funds Think INT Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from the previous quarter. On the other hand, there were a total of 19 hedge funds with a bullish position in INT a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, AQR Capital Management held the most valuable stake in World Fuel Services Corporation (NYSE:INT), which was worth $49.4 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $11 million worth of shares. D E Shaw, Citadel Investment Group, and Royce & Associates 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 AQR Capital Management allocated the biggest weight to World Fuel Services Corporation (NYSE:INT), around 0.08% of its 13F portfolio. Tudor Investment Corp is also relatively very bullish on the stock, earmarking 0.06 percent of its 13F equity portfolio to INT.
Seeing as World Fuel Services Corporation (NYSE:INT) has witnessed falling interest from the smart money, it's safe to say that there was a specific group of fund managers that decided to sell off their full holdings heading into Q4. It's worth mentioning that Paul Marshall and Ian Wace's Marshall Wace LLP said goodbye to the largest investment of the 750 funds watched by Insider Monkey, comprising about $2.9 million in stock. fund, Renaissance Technologies, also dumped its stock, about $1.7 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds heading into Q4.
Let's check out hedge fund activity in other stocks similar to World Fuel Services Corporation (NYSE:INT). These stocks are Compugen Ltd. (NASDAQ:CGEN), Terex Corporation (NYSE:TEX), Dicerna Pharmaceuticals Inc (NASDAQ:DRNA), HNI Corp (NYSE:HNI), Bloomin' Brands Inc (NASDAQ:BLMN), Park National Corporation (NYSE:PRK), and Gentherm Inc (NASDAQ:THRM). This group of stocks' market values match INT's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CGEN,14,76267,5 TEX,18,212256,-1 DRNA,31,183699,-4 HNI,7,31809,-3 BLMN,30,284019,7 PRK,2,1867,-10 THRM,10,78230,-3 Average,16,124021,-1.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $124 million. That figure was $80 million in INT's case. Dicerna Pharmaceuticals Inc (NASDAQ:DRNA) is the most popular stock in this table. On the other hand Park National Corporation (NYSE:PRK) is the least popular one with only 2 bullish hedge fund positions. World Fuel Services Corporation (NYSE:INT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for INT is 47.1. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on INT as the stock returned 42.4% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.