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2019 Review: Top Hedge Fund Stocks vs. Catalent Inc (CTLT)

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Total Return Index ETFs returned 31.2% in 2019. Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 41.3% during the same period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ consensus stock picks generate superior risk-adjusted returns. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Catalent Inc (NYSE:CTLT).

Catalent Inc (NYSE:CTLT) has experienced an increase in enthusiasm from smart money in recent months. Our calculations also showed that CTLT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

Today there are dozens of metrics investors can use to evaluate publicly traded companies. Some of the most innovative metrics are hedge fund and insider trading signals. We have shown that, historically, those who follow the top picks of the top investment managers can outperform their index-focused peers by a healthy margin (see the details here).

Andreas Halvorsen

Andreas Halvorsen of Viking Global

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. Keeping this in mind let’s take a glance at the key hedge fund action encompassing Catalent Inc (NYSE:CTLT).

What have hedge funds been doing with Catalent Inc (NYSE:CTLT)?

Heading into the fourth quarter of 2019, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 35% from one quarter earlier. By comparison, 23 hedge funds held shares or bullish call options in CTLT a year ago. So, let’s see 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 Viking Global, which reported holding $67.9 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $63.1 million position. Other investors bullish on the company included Partner Fund Management, Highline Capital Management, and D E Shaw. In terms of the portfolio weights assigned to each position Highline Capital Management allocated the biggest weight to Catalent Inc (NYSE:CTLT), around 7.34% of its 13F portfolio. Partner Fund Management is also relatively very bullish on the stock, dishing out 1.56 percent of its 13F equity portfolio to CTLT.

Now, key hedge funds were leading the bulls’ herd. Renaissance Technologies assembled the most valuable position in Catalent Inc (NYSE:CTLT). Renaissance Technologies had $24.4 million invested in the company at the end of the quarter. Brad Farber’s Atika Capital also made a $5.3 million investment in the stock during the quarter. The other funds with brand new CTLT positions are Ken Fisher’s Fisher Asset Management, Sander Gerber’s Hudson Bay Capital Management, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Let’s also examine hedge fund activity in other stocks similar to Catalent Inc (NYSE:CTLT). These stocks are TIM Participacoes SA (NYSE:TSU), Ceridian HCM Holding Inc. (NYSE:CDAY), Autoliv Inc. (NYSE:ALV), and Molina Healthcare, Inc. (NYSE:MOH). This group of stocks’ market values are closest to CTLT’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TSU 13 290605 1
CDAY 28 1115679 6
ALV 14 627166 1
MOH 25 1040324 -7
Average 20 768444 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $768 million. That figure was $393 million in CTLT’s case. Ceridian HCM Holding Inc. (NYSE:CDAY) is the most popular stock in this table. On the other hand TIM Participacoes SA (NYSE:TSU) is the least popular one with only 13 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on CTLT as the stock returned 80.6% in 2019 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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