Because of better-than-expected results for its second quarter in addition to its third quarter guidance, shares of IPG Photonics Corporation (NASDAQ:IPGP) are up by more than 13% in afternoon trading. The lasers company reported earnings of $61.3 million or an adjusted earnings per share of $1.15, up by 27% and 25%, respectively, from the same quarter last year. Revenue was reported to be $235.1 million, up by 22% from last year. Analysts were expecting the company to report earnings of $1.11 per share on revenues of $222.04 million. Revenues in the core materials processing industrial laser segment went up by 21% year-over-year while the growth was 54% year-over-year for “other applications”. Sales rose by 27% compared to the same quarter last year for the high-power fiber laser segment. Furthermore, IPG Photonics Corporation (NASDAQ:IPGP) is guiding for revenue in the third quarter of between $235 million and $250 million. Earnings per share for the third quarter is expected by the company to be between $1.15 and $1.30. Analysts are expecting the company to report third quarter revenues of $230.9 million and earnings per share of $1.15.
The solid results from IPG Photonics Corporation (NASDAQ:IPGP) for the second quarter and its analyst-forecast-beating guidance, however, is not in line with how confident hedge funds among those we track were about the company in the first quarter. Heading into the second quarter, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, down by one from the previous quarter. Meanwhile, looking at the total value of their holdings yields more bearish sentiment, as it declined by a whopping 42.54% quarter-on-quarter to $164.73 million by March 31, despite the stock soaring by 23.73% in the first quarter. This shows that the smart money was cashing out of the stock as shares rose and clearly didn’t foresee much near-term growth left for the stock. They weren’t wrong, as shares slid by over 8% in the second quarter and are still trading below their March 31 level, despite the gains today.
Let’s first take a step back and analyze how tracking hedge funds can help an everyday investor. Through our research, we discovered that a portfolio of the 15 most popular small-cap picks of hedge funds beat the S&P500 Total Return Index by nearly a percentage point per month on average between 1999 and 2012. On the other hand, the most popular large-cap picks of hedge funds underperformed the same index by seven basis points per month during the same period. This is likely a surprise to many investors, who think of small-caps as risky, unpredictable stocks and put more faith in large-cap stocks. In forward tests since August 2012, these top small-cap stocks beat the market by an impressive 66.5 percentage points, returning over 123.1% (read the details here). Hence, a retail investor needs to isolate himself from the herd and take advantage of the best growth opportunities in the market by concentrating on small-cap stocks.
Insider Monkey also follows insider trades in companies such as IPG Photonics to gather if insiders of these companies are bullish in their firms’ shares. There have been no purchases of shares by insiders so far this year. The most recent sale of shares by an insider of IPG Photonics was by Director Valentin Gapontsev, who sold 15,000 shares on June 4. He also sold 5,000 shares on May 13 and 10,000 shares on May 4.
Taking all of that into consideration, we’re going to view the new hedge fund activity surrounding IPG Photonics Corporation.
What have hedge funds been doing with IPG Photonics Corporation (NASDAQ:IPGP)?
According to hedge fund experts at Insider Monkey, Chuck Royce‘s Royce & Associates had the biggest position in IPG Photonics Corporation (NASDAQ:IPGP), holding 694,706 shares worth close to $64.4 million, amounting to 0.2% of its total 13F portfolio. On Royce & Associates’s heels is Odey Asset Management Group, managed by Crispin Odey, which held 378,471 shares for a $35.1 million position; the fund had 2% of its 13F portfolio invested in the stock. Other members of the smart money with similar optimism included Ken Fisher’s Fisher Asset Management, Matthew A. Weatherbie’s Weatherbie Capital, and David Kowitz and Sheldon Kasowitz’s Indus Capital.
John Croghan and Richard Fradin‘s Rail-Splitter Capital Management cut the largest stake of all the hedgies followed by Insider Monkey, dumping 134,369 shares worth close to $10.07 million. Joel Greenblatt’s fund, Gotham Asset Management, also dropped its 59,750 shares, worth about $4.48 million.
Due to the strong bearish sentiment of the world’s foremost money managers on IPG Photonics Corporation (NASDAQ:IPGP), we cannot recommend a long position in the stock now even in light of the improved results, as we feel they are already baked into the stock now.
Disclosure: None
