The successful funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Neogen Corporation (NASDAQ:NEOG) from the perspective of those successful funds.
Neogen Corporation (NASDAQ:NEOG) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 10 hedge funds’ portfolios at the end of the third quarter of 2016. At the end of this article we will also compare NEOG to other stocks including Moog Inc (NYSE:MOG), Criteo SA (ADR) (NASDAQ:CRTO), and Sothebys (NYSE:BID) to get a better sense of its popularity.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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Now, let’s take a glance at the fresh action regarding Neogen Corporation (NASDAQ:NEOG).
What does the smart money think about Neogen Corporation (NASDAQ:NEOG)?
At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, unchanged from one quarter earlier. The graph below displays the number of hedge funds with bullish position in NEOG over the last 5 quarters. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Robert Joseph Caruso of Select Equity Group holds the most valuable position in Neogen Corporation (NASDAQ:NEOG). The fund reportedly holds a $10.7 million position in the stock. The second largest stake is held by Renaissance Technologies, one of the largest hedge funds in the world, which oversees a $9 million investment in NEOG. Remaining hedge funds and institutional investors that hold long positions include Chuck Royce’s Royce & Associates, Joseph A. Jolson’s Harvest Capital Strategies and Matthew A. Weatherbie’s Weatherbie Capital. 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.
Judging by the fact that Neogen Corporation (NASDAQ:NEOG) has experienced no change in interest from hedge fund managers, we must look at a few select hedge funds that decided to sell off their entire stakes in the third quarter. Interestingly, Matthew Hulsizer’s PEAK6 Capital Management sold off the largest position of all the investors followed by Insider Monkey, worth an estimated $0.6 million in stock, and Michael Platt and William Reeves’s BlueCrest Capital Mgmt. was right behind this move, as the fund cut about $0.2 million worth of shares.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Neogen Corporation (NASDAQ:NEOG) but similarly valued. We will take a look at Moog Inc (NYSE:MOG), Criteo SA (ADR) (NASDAQ:CRTO), Sothebys (NYSE:BID), and Dril-Quip, Inc. (NYSE:DRQ). This group of stocks’ market values are closest to NEOG’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MOG | 17 | 91853 | 1 |
| CRTO | 13 | 132910 | 0 |
| BID | 20 | 559010 | 4 |
| DRQ | 24 | 145709 | 3 |
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $232 million. That figure was $29 million in NEOG’s case. Dril-Quip, Inc. (NYSE:DRQ) is the most popular stock in this table. On the other hand Criteo SA (ADR) (NASDAQ:CRTO) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Neogen Corporation (NASDAQ:NEOG) is even less popular than CRTO. 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.
Disclosure: None
