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Did Hedge Funds Drop The Ball On Innophos Holdings, Inc. (IPHS)?

Billionaire hedge fund managers such as David Abrams, 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.

Innophos Holdings, Inc. (NASDAQ:IPHS) has experienced an increase in activity from the world’s largest hedge funds in recent months. Our calculations also showed that iphs isn’t among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Paul Marshall Marshall Wace

Paul Marshall of Marshall Wace

We’re going to check out the fresh hedge fund action regarding Innophos Holdings, Inc. (NASDAQ:IPHS).

Hedge fund activity in Innophos Holdings, Inc. (NASDAQ:IPHS)

At the end of the fourth quarter, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 30% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in IPHS over the last 14 quarters. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

No of Hedge Funds with IPHS Positions

Of the funds tracked by Insider Monkey, Renaissance Technologies, managed by Jim Simons, holds the most valuable position in Innophos Holdings, Inc. (NASDAQ:IPHS). Renaissance Technologies has a $19.3 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by D E Shaw, led by D. E. Shaw, holding a $4.7 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining professional money managers that are bullish encompass Ken Griffin’s Citadel Investment Group, Israel Englander’s Millennium Management and Paul Marshall and Ian Wace’s Marshall Wace LLP.

As one would reasonably expect, some big names were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the most outsized position in Innophos Holdings, Inc. (NASDAQ:IPHS). Marshall Wace LLP had $1.3 million invested in the company at the end of the quarter. Peter Muller’s PDT Partners also initiated a $0.4 million position during the quarter. The following funds were also among the new IPHS investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Benjamin A. Smith’s Laurion Capital Management, and Matthew Tewksbury’s Stevens Capital Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Innophos Holdings, Inc. (NASDAQ:IPHS) but similarly valued. These stocks are Comstock Resources Inc (NYSE:CRK), Arcus Biosciences, Inc. (NYSE:RCUS), Surgery Partners, Inc. (NASDAQ:SGRY), and Blue Bird Corporation (NASDAQ:BLBD). This group of stocks’ market valuations match IPHS’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CRK 8 4129 3
RCUS 9 70467 0
SGRY 9 27358 0
BLBD 7 70468 -11
Average 8.25 43106 -2

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.25 hedge funds with bullish positions and the average amount invested in these stocks was $43 million. That figure was $35 million in IPHS’s case. Arcus Biosciences, Inc. (NYSE:RCUS) is the most popular stock in this table. On the other hand Blue Bird Corporation (NASDAQ:BLBD) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Innophos Holdings, Inc. (NASDAQ:IPHS) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on IPHS as the stock returned 30.9% and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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