Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Ingevity Corporation (NYSE:NGVT) to find out whether there were any major changes in hedge funds’ views.
Ingevity Corporation (NYSE:NGVT) was in 21 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 31. NGVT shareholders have witnessed an increase in hedge fund sentiment of late. There were 20 hedge funds in our database with NGVT holdings at the end of March. Our calculations also showed that NGVT isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Jeffrey Ubben, Founder of ValueAct Capital and Inclusive Capital Partners
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Do Hedge Funds Think NGVT Is A Good Stock To Buy Now?
At Q2’s end, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NGVT over the last 24 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Broad Bay Capital, managed by Richard Scott Greeder, holds the number one position in Ingevity Corporation (NYSE:NGVT). Broad Bay Capital has a $80.5 million position in the stock, comprising 9.5% of its 13F portfolio. On Broad Bay Capital’s heels is Maple Rock Capital, managed by Len Kipp and Xavier Majic, which holds a $57.8 million position; the fund has 8.7% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish encompass Jeff Ubben’s Inclusive Capital, D. E. Shaw’s D E Shaw and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Broad Bay Capital allocated the biggest weight to Ingevity Corporation (NYSE:NGVT), around 9.54% of its 13F portfolio. Maple Rock Capital is also relatively very bullish on the stock, dishing out 8.68 percent of its 13F equity portfolio to NGVT.
As aggregate interest increased, key money managers were leading the bulls’ herd. Driehaus Capital, managed by Richard Driehaus, established the most valuable position in Ingevity Corporation (NYSE:NGVT). Driehaus Capital had $12.2 million invested in the company at the end of the quarter. Renaissance Technologies also made a $1.6 million investment in the stock during the quarter. The other funds with brand new NGVT positions are Michael Gelband’s ExodusPoint Capital and Lee Ainslie’s Maverick Capital.
Let’s now review hedge fund activity in other stocks similar to Ingevity Corporation (NYSE:NGVT). We will take a look at Prospect Capital Corporation (NASDAQ:PSEC), Kontoor Brands, Inc. (NASDAQ:KTB), Liberty Latin America Ltd. (NASDAQ:LILA), Vertex, Inc. (NASDAQ:VERX), Cabot Corporation (NYSE:CBT), Ameresco Inc (NYSE:AMRC), and Texas Capital Bancshares Inc (NASDAQ:TCBI). This group of stocks’ market values are closest to NGVT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PSEC | 11 | 48102 | 4 |
| KTB | 23 | 186225 | 7 |
| LILA | 16 | 137765 | 2 |
| VERX | 8 | 35739 | -3 |
| CBT | 18 | 83575 | -5 |
| AMRC | 15 | 74599 | -1 |
| TCBI | 27 | 323721 | -2 |
| Average | 16.9 | 127104 | 0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.9 hedge funds with bullish positions and the average amount invested in these stocks was $127 million. That figure was $317 million in NGVT’s case. Texas Capital Bancshares Inc (NASDAQ:TCBI) is the most popular stock in this table. On the other hand Vertex, Inc. (NASDAQ:VERX) is the least popular one with only 8 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 60.5. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately NGVT wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on NGVT were disappointed as the stock returned -3.4% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow Ingevity Corp (NYSE:NGVT)
Follow Ingevity Corp (NYSE:NGVT)
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Disclosure: None. This article was originally published at Insider Monkey.
