At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Ingevity Corporation (NYSE:NGVT) at the end of the second quarter and determine whether the smart money was really smart about this stock.
Ingevity Corporation (NYSE:NGVT) investors should pay attention to an increase in hedge fund interest recently. Ingevity Corporation (NYSE:NGVT) was in 31 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 29. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that NGVT 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.
In today’s marketplace there are many tools stock market investors can use to analyze stocks. A duo of the most innovative tools are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the top picks of the best hedge fund managers can beat the market by a solid margin (see the details here).
John Overdeck of Two Sigma Advisors
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. Keeping this in mind let’s review the recent hedge fund action surrounding Ingevity Corporation (NYSE:NGVT).
What have hedge funds been doing with Ingevity Corporation (NYSE:NGVT)?
At the end of June, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards NGVT over the last 20 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Ingevity Corporation (NYSE:NGVT) was held by Broad Bay Capital, which reported holding $46.3 million worth of stock at the end of September. It was followed by Maple Rock Capital with a $40.4 million position. Other investors bullish on the company included D E Shaw, Arrowstreet Capital, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Broad Bay Capital allocated the biggest weight to Ingevity Corporation (NYSE:NGVT), around 8.27% of its 13F portfolio. Maple Rock Capital is also relatively very bullish on the stock, earmarking 8.09 percent of its 13F equity portfolio to NGVT.
Consequently, key money managers have jumped into Ingevity Corporation (NYSE:NGVT) headfirst. Samlyn Capital, managed by Robert Pohly, established the most valuable position in Ingevity Corporation (NYSE:NGVT). Samlyn Capital had $11.4 million invested in the company at the end of the quarter. Richard Driehaus’s Driehaus Capital also initiated a $6.2 million position during the quarter. The following funds were also among the new NGVT investors: Joel Greenblatt’s Gotham Asset Management, Donald Sussman’s Paloma Partners, and Mika Toikka’s AlphaCrest Capital Management.
Let’s go over hedge fund activity in other stocks similar to Ingevity Corporation (NYSE:NGVT). We will take a look at SAGE Therapeutics Inc (NASDAQ:SAGE), Apple Hospitality REIT Inc (NYSE:APLE), Alliance Data Systems Corporation (NYSE:ADS), Coca-Cola Consolidated Inc. (NASDAQ:COKE), Copa Holdings, S.A. (NYSE:CPA), GrafTech International Ltd. (NYSE:EAF), and Macy’s, Inc. (NYSE:M). All of these stocks’ market caps match NGVT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SAGE | 30 | 463639 | 0 |
| APLE | 14 | 56454 | 3 |
| ADS | 29 | 345419 | -1 |
| COKE | 13 | 18558 | 4 |
| CPA | 24 | 213886 | 9 |
| EAF | 24 | 125189 | 1 |
| M | 36 | 412417 | 6 |
| Average | 24.3 | 233652 | 3.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.3 hedge funds with bullish positions and the average amount invested in these stocks was $234 million. That figure was $240 million in NGVT’s case. Macy’s, Inc. (NYSE:M) is the most popular stock in this table. On the other hand Coca-Cola Consolidated Inc. (NASDAQ:COKE) is the least popular one with only 13 bullish hedge fund positions. Ingevity Corporation (NYSE:NGVT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NGVT is 76.1. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 23.8% in 2020 through September 14th and beat the market by 17.6 percentage points. Unfortunately NGVT wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on NGVT were disappointed as the stock returned 8.7% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Follow Ingevity Corp (NYSE:NGVT)
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Disclosure: None. This article was originally published at Insider Monkey.
