Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. After several tireless days we have finished crunching the numbers from nearly 835 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of December 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Ingevity Corporation (NYSE:NGVT).
Ingevity Corporation (NYSE:NGVT) investors should be aware of an increase in activity from the world’s largest hedge funds of late. NGVT was in 27 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 26 hedge funds in our database with NGVT holdings at the end of the previous quarter. Our calculations also showed that NGVT isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Richard Chilton of Chilton Investment Company
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s analyze 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 the fourth quarter, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in NGVT over the last 18 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 $39.4 million worth of stock at the end of September. It was followed by Chilton Investment Company with a $37.9 million position. Other investors bullish on the company included Millennium Management, Scopus Asset Management, and Falcon Edge Capital. In terms of the portfolio weights assigned to each position Broad Bay Capital allocated the biggest weight to Ingevity Corporation (NYSE:NGVT), around 9.39% of its 13F portfolio. Falcon Edge Capital is also relatively very bullish on the stock, setting aside 1.96 percent of its 13F equity portfolio to NGVT.
Now, key hedge funds have jumped into Ingevity Corporation (NYSE:NGVT) headfirst. Scopus Asset Management, managed by Alexander Mitchell, created the biggest position in Ingevity Corporation (NYSE:NGVT). Scopus Asset Management had $11.4 million invested in the company at the end of the quarter. Richard Gerson and Navroz D. Udwadia’s Falcon Edge Capital also made a $10.1 million investment in the stock during the quarter. The other funds with brand new NGVT positions are Renaissance Technologies, Noam Gottesman’s GLG Partners, and Hoon Kim’s Quantinno Capital.
Let’s go over hedge fund activity in other stocks similar to Ingevity Corporation (NYSE:NGVT). We will take a look at Envestnet Inc (NYSE:ENV), LivaNova PLC (NASDAQ:LIVN), Nevro Corp (NYSE:NVRO), and Apple Hospitality REIT Inc (NYSE:APLE). This group of stocks’ market valuations resemble NGVT’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ENV | 18 | 86201 | 3 |
| LIVN | 22 | 195956 | 5 |
| NVRO | 33 | 961499 | 11 |
| APLE | 15 | 135141 | 0 |
| Average | 22 | 344699 | 4.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $345 million. That figure was $159 million in NGVT’s case. Nevro Corp (NYSE:NVRO) is the most popular stock in this table. On the other hand Apple Hospitality REIT Inc (NYSE:APLE) is the least popular one with only 15 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. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately NGVT wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on NGVT were disappointed as the stock returned -62.5% 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
