Is Catalent Inc (NYSE:CTLT) a good bet right now? We like to analyze hedge fund sentiment before doing days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy league graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is Catalent Inc (NYSE:CTLT) the right investment to pursue these days? Prominent investors are getting more optimistic. The number of long hedge fund bets rose by 8 lately. Our calculations also showed that CTLT isn’t among the 30 most popular stocks among hedge funds.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to take a peek at the new hedge fund action surrounding Catalent Inc (NYSE:CTLT).
How have hedgies been trading Catalent Inc (NYSE:CTLT)?
Heading into the fourth quarter of 2018, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 53% from one quarter earlier. On the other hand, there were a total of 19 hedge funds with a bullish position in CTLT at the beginning of this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Catalent Inc (NYSE:CTLT) was held by D E Shaw, which reported holding $77.6 million worth of stock at the end of September. It was followed by Viking Global with a $68.4 million position. Other investors bullish on the company included Select Equity Group, Citadel Investment Group, and Redmile Group.
As industrywide interest jumped, key money managers were leading the bulls’ herd. Select Equity Group, managed by Robert Joseph Caruso, created the most valuable position in Catalent Inc (NYSE:CTLT). Select Equity Group had $67.6 million invested in the company at the end of the quarter. Ian Simm’s Impax Asset Management also made a $17.5 million investment in the stock during the quarter. The other funds with brand new CTLT positions are Paul Marshall and Ian Wace’s Marshall Wace LLP, Jim Simons’s Renaissance Technologies, and Dmitry Balyasny’s Balyasny Asset Management.
Let’s now review hedge fund activity in other stocks similar to Catalent Inc (NYSE:CTLT). We will take a look at Tallgrass Energy, LP (NYSE:TGE), Park Hotels & Resorts Inc. (NYSE:PK), SAGE Therapeutics Inc (NASDAQ:SAGE), and Alkermes Plc (NASDAQ:ALKS). This group of stocks’ market valuations resemble CTLT’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TGE | 6 | 41101 | 1 |
| PK | 15 | 692105 | 1 |
| SAGE | 37 | 602332 | -1 |
| ALKS | 16 | 159863 | -1 |
| Average | 18.5 | 373850 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $374 million. That figure was $401 million in CTLT’s case. SAGE Therapeutics Inc (NASDAQ:SAGE) is the most popular stock in this table. On the other hand 0 is the least popular one with only 6 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 SAGE might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
