Is IPGP Stock A Buy or Sell?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 887 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their December 31st holdings, data that is available nowhere else. Should you consider IPG Photonics Corporation (NASDAQ:IPGP) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

Is IPGP stock a buy? IPG Photonics Corporation (NASDAQ:IPGP) was in 25 hedge funds’ portfolios at the end of December. The all time high for this statistic is 30. IPGP has seen an increase in enthusiasm from smart money of late. There were 24 hedge funds in our database with IPGP holdings at the end of September. Our calculations also showed that IPGP isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).

Chuck Royce of Royce & Associates

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we’re going to take a look at the latest hedge fund action encompassing IPG Photonics Corporation (NASDAQ:IPGP).

Do Hedge Funds Think IPGP Is A Good Stock To Buy Now?

Heading into the first quarter of 2021, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the third quarter of 2020. By comparison, 25 hedge funds held shares or bullish call options in IPGP a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ian Simm’s Impax Asset Management has the largest position in IPG Photonics Corporation (NASDAQ:IPGP), worth close to $164.5 million, amounting to 1% of its total 13F portfolio. Coming in second is Fundsmith LLP, led by Terry Smith, holding a $140.4 million position; 0.5% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors with similar optimism comprise Chuck Royce’s Royce & Associates, Ken Fisher’s Fisher Asset Management and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position Motley Fool Asset Management allocated the biggest weight to IPG Photonics Corporation (NASDAQ:IPGP), around 2.03% of its 13F portfolio. Impax Asset Management is also relatively very bullish on the stock, dishing out 1.05 percent of its 13F equity portfolio to IPGP.

As industrywide interest jumped, key hedge funds were leading the bulls’ herd. Balyasny Asset Management, managed by Dmitry Balyasny, created the most outsized position in IPG Photonics Corporation (NASDAQ:IPGP). Balyasny Asset Management had $16.8 million invested in the company at the end of the quarter. Renaissance Technologies also made a $4.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Ken Griffin’s Citadel Investment Group, Peter Muller’s PDT Partners, and Greg Eisner’s Engineers Gate Manager.

Let’s now review hedge fund activity in other stocks similar to IPG Photonics Corporation (NASDAQ:IPGP). We will take a look at Sibanye Stillwater Limited (NYSE:SBSW), Fortune Brands Home & Security Inc (NYSE:FBHS), InterContinental Hotels Group PLC (NYSE:IHG), Autohome Inc (NYSE:ATHM), Brookfield Renewable Partners L.P. (NYSE:BEP), W.R. Berkley Corporation (NYSE:WRB), and Dr. Reddy’s Laboratories Limited (NYSE:RDY). This group of stocks’ market caps match IPGP’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.9 hedge funds with bullish positions and the average amount invested in these stocks was $362 million. That figure was $522 million in IPGP’s case. W.R. Berkley Corporation (NYSE:WRB) is the most popular stock in this table. On the other hand InterContinental Hotels Group PLC (NYSE:IHG) is the least popular one with only 7 bullish hedge fund positions. IPG Photonics Corporation (NASDAQ:IPGP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for IPGP is 61. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and beat the market again by 0.9 percentage points. Unfortunately IPGP wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on IPGP were disappointed as the stock returned -0.7% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

Disclosure: None. This article was originally published at Insider Monkey.