Is Ingles Markets, Incorporated (IMKTA) A Good Stock To Buy?

It was a rough third quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 7% during the quarter. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by about 14 percentage points between June 25 and October 30, as investors fled less-known quantities for safe havens. This was the case with hedge funds, who we heard were pulling money from the market amid the volatility, which included money from small-cap stocks, which they invest in at a higher rate than other investors. This action contributed to the greater decline in these stocks during the tumultuous period. We will study how this market volatility affected their sentiment towards Ingles Markets, Incorporated (NASDAQ:IMKTA) during the quarter below.

Ingles Markets, Incorporated (NASDAQ:IMKTA) was in 11 hedge funds’ portfolios at the end of the third quarter of 2015. IMKTA has experienced a decrease in hedge fund sentiment in recent months. There were 14 hedge funds in our database with IMKTA positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Caesars Acquisition Company (NASDAQ:CACQ), Spartan Stores, Inc. (NASDAQ:SPTN), and Crocs, Inc. (NASDAQ:CROX) to gather more data points.

To the average investor there are plenty of gauges investors have at their disposal to grade publicly traded companies. Some of the best gauges are hedge fund and insider trading signals. We have shown that, historically, those who follow the top picks of the elite hedge fund managers can trounce the broader indices by a healthy amount (see the details here).

With all of this in mind, we’re going to review the key action encompassing Ingles Markets, Incorporated (NASDAQ:IMKTA).

Hedge fund activity in Ingles Markets, Incorporated (NASDAQ:IMKTA)

Heading into Q4, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -21% from the previous quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Mario Gabelli’s GAMCO Investors has the number one position in Ingles Markets, Incorporated (NASDAQ:IMKTA), worth close to $60.3 million, amounting to 0.4% of its total 13F portfolio. The second most bullish fund manager is Gotham Asset Management, managed by Joel Greenblatt, which holds an $12 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining peers that are bullish consist of Jim Simons’s Renaissance Technologies, Cliff Asness’s AQR Capital Management and Matthew Hulsizer’s PEAK6 Capital Management.

Because Ingles Markets, Incorporated (NASDAQ:IMKTA) has experienced falling interest from hedge fund managers, it’s easy to see that there was a specific group of money managers who were dropping their positions entirely in the third quarter. At the top of the heap, Israel Englander’s Millennium Management dumped the biggest position of all the hedgies tracked by Insider Monkey, valued at about $2.7 million in stock, and David Costen Haley’s HBK Investments was right behind this move, as the fund dumped about $0.8 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 3 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Ingles Markets, Incorporated (NASDAQ:IMKTA). These stocks are Caesars Acquisition Company (NASDAQ:CACQ), Spartan Stores, Inc. (NASDAQ:SPTN), Crocs, Inc. (NASDAQ:CROX), and Mantech International Corp (NASDAQ:MANT). All of these stocks’ market caps resemble IMKTA’s market cap.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $109 million. That figure was $95 million in IMKTA’s case. Spartan Stores, Inc. (NASDAQ:SPTN) is the most popular stock in this table. On the other hand Caesars Acquisition Company (NASDAQ:CACQ) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Ingles Markets, Incorporated (NASDAQ:IMKTA) is even less popular than CACQ. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.