Is Information Services Group, Inc. (III) A Good Stock To Buy?
Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 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 Information Services Group, Inc. (NASDAQ:III) in this article.
Information Services Group, Inc. (NASDAQ:III) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 5 hedge funds' portfolios at the end of the third quarter of 2019. At the end of this article we will also compare III to other stocks including Lee Enterprises, Incorporated (NYSE:LEE), Chicken Soup for the Soul Entertainment, Inc. (NASDAQ:CSSE), and Flexsteel Industries, Inc. (NASDAQ:FLXS) to get a better sense of its popularity.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To the average investor there are plenty of tools shareholders put to use to grade stocks. A duo of the most under-the-radar tools are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the top fund managers can outclass their index-focused peers by a significant margin (see the details here).
[caption id="attachment_728717" align="aligncenter" width="473"]
Roger Ibbotson of Zebra Capital Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Now we're going to take a peek at the recent hedge fund action surrounding Information Services Group, Inc. (NASDAQ:III).
Hedge fund activity in Information Services Group, Inc. (NASDAQ:III)
At Q3's end, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in III over the last 17 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Private Capital Management held the most valuable stake in Information Services Group, Inc. (NASDAQ:III), which was worth $15.2 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $5.4 million worth of shares. Arrowstreet Capital, Zebra Capital Management, and Minerva Advisors 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 Private Capital Management allocated the biggest weight to Information Services Group, Inc. (NASDAQ:III), around 2.64% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, dishing out 0.11 percent of its 13F equity portfolio to III.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's now take a look at hedge fund activity in other stocks similar to Information Services Group, Inc. (NASDAQ:III). These stocks are Lee Enterprises, Incorporated (NYSE:LEE), Chicken Soup for the Soul Entertainment, Inc. (NASDAQ:CSSE), Flexsteel Industries, Inc. (NASDAQ:FLXS), and Aptinyx Inc. (NASDAQ:APTX). This group of stocks' market caps are similar to III's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LEE,12,11311,2 CSSE,1,3245,0 FLXS,7,19339,1 APTX,8,15552,0 Average,7,12362,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $12 million. That figure was $21 million in III's case. Lee Enterprises, Incorporated (NYSE:LEE) is the most popular stock in this table. On the other hand Chicken Soup for the Soul Entertainment, Inc. (NASDAQ:CSSE) is the least popular one with only 1 bullish hedge fund positions. Information Services Group, Inc. (NASDAQ:III) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately III wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); III investors were disappointed as the stock returned -1.2% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
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