Is Innophos Holdings, Inc. (IPHS) A Good Stock To Buy?

Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.

Is Innophos Holdings, Inc. (NASDAQ:IPHS) a buy, sell, or hold? Prominent investors are definitely buying. The number of bullish hedge fund positions experienced an increase of 3 recently. IPHSwas in 17 hedge funds’ portfolios at the end of the third quarter of 2016. There were 14 hedge funds in our database with IPHS holdings at the end of the previous quarter. At the end of this article we will also compare IPHS to other stocks including McGrath RentCorp (NASDAQ:MGRC), Alamo Group, Inc. (NYSE:ALG), and Bob Evans Farms Inc (NASDAQ:BOBE) to get a better sense of its popularity.

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.

With all of this in mind, let’s take a peek at the new action surrounding Innophos Holdings, Inc. (NASDAQ:IPHS).

What have hedge funds been doing with Innophos Holdings, Inc. (NASDAQ:IPHS)?

Heading into the fourth quarter of 2016, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a jump of 21% from the second quarter of 2016. By comparison, 14 hedge funds held shares or bullish call options in IPHS heading into this year. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Jim Simons’s Renaissance Technologies has the biggest position in Innophos Holdings, Inc. (NASDAQ:IPHS), worth close to $27.3 million, amounting to less than 0.1% of its total 13F portfolio. The second most bullish fund manager is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $6.5 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Some other professional money managers that are bullish encompass Joel Greenblatt’s Gotham Asset Management, Cliff Asness’s AQR Capital Management and Israel Englander’s Millennium 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.

Now, specific money managers were leading the bulls’ herd. Adage Capital Management, led by Phill Gross and Robert Atchinson, created the biggest position in Innophos Holdings, Inc. (NASDAQ:IPHS). According to its latest 13F filing, the fund had $1.3 million invested in the company at the end of the quarter. Glenn Russell Dubin’s Highbridge Capital Management also made a $1.1 million investment in the stock during the quarter. The following funds were also among the new IPHS investors: Matthew Tewksbury’s Stevens Capital Management, David Costen Haley’s HBK Investments, and Robert B. Gillam’s McKinley Capital Management.

Let’s check out hedge fund activity in other stocks similar to Innophos Holdings, Inc. (NASDAQ:IPHS). We will take a look at McGrath RentCorp (NASDAQ:MGRC), Alamo Group, Inc. (NYSE:ALG), Bob Evans Farms Inc (NASDAQ:BOBE), and Virtus Investment Partners Inc (NASDAQ:VRTS). All of these stocks’ market caps resemble IPHS’s market cap.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $100 million. That figure was $56 million in IPHS’s case. Bob Evans Farms Inc (NASDAQ:BOBE) is the most popular stock in this table. On the other hand Alamo Group, Inc. (NYSE:ALG) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Innophos Holdings, Inc. (NASDAQ:IPHS) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: none.