Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Catalent Inc (NYSE:CTLT) .
Catalent Inc (NYSE:CTLT) was in 18 hedge funds’ portfolios at the end of the third quarter of 2016. CTLT shareholders have witnessed an increase in hedge fund sentiment in recent months. There were 12 hedge funds in our database with CTLT holdings at the end of the previous quarter. At the end of this article we will also compare CTLT to other stocks including EnLink Midstream LLC (NYSE:ENLC), Helen of Troy Limited (NASDAQ:HELE), and NRG Yield, Inc. Class C (NYSE:NYLD) to get a better sense of its popularity.
Follow Catalent Inc. (NYSE:CTLT)
Follow Catalent Inc. (NYSE:CTLT)
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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How have hedgies been trading Catalent Inc (NYSE:CTLT)?
At the end of the third quarter, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a rise of 50% from the second quarter of 2016. By comparison, 15 hedge funds held shares or bullish call options in CTLT heading into this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Benjamin A. Smith’s Laurion Capital Management holds the most valuable position in Catalent Inc (NYSE:CTLT) worth around $51.8 million. The second most bullish fund manager is Paul Marshall and Ian Wace’s Marshall Wace LLP, which holds a $32.2 million position. Some other professional money managers that are bullish contain Jim Simons’ Renaissance Technologies, Israel Englander’s Millennium Management, and David Rodriguez-Fraile’s BlueMar Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Consequently, some big names were leading the bulls’ herd. Renaissance Technologies created the biggest position in Catalent Inc (NYSE:CTLT), investing $12.7 million in the company at the end of the quarter. BlueMar Capital Management also initiated a $5.9 million position during the quarter. The other funds with brand new CTLT positions are Solomon Kumin’s Folger Hill Asset Management, John Overdeck and David Siegel’s Two Sigma Advisors, and David Costen Haley’s HBK Investments.
Let’s now take a look at hedge fund activity in other stocks similar to Catalent Inc (NYSE:CTLT). We will take a look at EnLink Midstream LLC (NYSE:ENLC), Helen of Troy Limited (NASDAQ:HELE), NRG Yield, Inc. Class C (NYSE:NYLD), and Cabot Corp (NYSE:CBT). All of these stocks’ market caps are similar to CTLT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ENLC | 8 | 23951 | 3 |
| HELE | 19 | 118690 | 8 |
| NYLD | 25 | 209760 | -4 |
| CBT | 19 | 188841 | -1 |
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $135 million. That figure was $132 million in CTLT’s case. NRG Yield, Inc. Class C (NYSE:NYLD) is the most popular stock in this table. On the other hand EnLink Midstream LLC (NYSE:ENLC) is the least popular one with only 8 bullish hedge fund positions. Catalent Inc (NYSE:CTLT) 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. In this regard NYLD might be a better candidate to consider taking a long position in.
Disclosure: None
