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Did Hedge Funds Make The Right Call On Ingevity Corporation (NGVT) ?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtIngevity Corporation (NYSE:NGVT) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Ingevity Corporation (NYSE:NGVT) has experienced an increase in activity from the world’s largest hedge funds of late. Our calculations also showed that NGVT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Navroz Udwadia - Falcon Edge Capital

Navroz D. Udwadia of Falcon Edge Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to analyze the latest hedge fund action surrounding Ingevity Corporation (NYSE:NGVT).

What have hedge funds been doing with Ingevity Corporation (NYSE:NGVT)?

At the end of the first quarter, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the fourth quarter of 2019. On the other hand, there were a total of 23 hedge funds with a bullish position in NGVT 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.

The largest stake in Ingevity Corporation (NYSE:NGVT) was held by Maple Rock Capital, which reported holding $29.4 million worth of stock at the end of September. It was followed by Broad Bay Capital with a $27.5 million position. Other investors bullish on the company included D E Shaw, Falcon Edge Capital, and Chilton Investment Company. In terms of the portfolio weights assigned to each position Broad Bay Capital allocated the biggest weight to Ingevity Corporation (NYSE:NGVT), around 7.55% of its 13F portfolio. Maple Rock Capital is also relatively very bullish on the stock, designating 7.53 percent of its 13F equity portfolio to NGVT.

Consequently, some big names have been driving this bullishness. Maple Rock Capital, managed by Len Kipp and Xavier Majic, established the most valuable position in Ingevity Corporation (NYSE:NGVT). Maple Rock Capital had $29.4 million invested in the company at the end of the quarter. Thomas E. Claugus’s GMT Capital also initiated a $6.1 million position during the quarter. The other funds with brand new NGVT positions are Brandon Haley’s Holocene Advisors, Mark Lee’s Mountaineer Partners Management, and Michael Gelband’s ExodusPoint Capital.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Ingevity Corporation (NYSE:NGVT) but similarly valued. These stocks are Insperity Inc (NYSE:NSP), Sinclair Broadcast Group, Inc. (NASDAQ:SBGI), Navient Corp (NASDAQ:NAVI), and First Financial Bancorp (NASDAQ:FFBC). All of these stocks’ market caps match NGVT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NSP 29 154086 8
SBGI 25 178673 -8
NAVI 33 152856 -5
FFBC 8 8121 3
Average 23.75 123434 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.75 hedge funds with bullish positions and the average amount invested in these stocks was $123 million. That figure was $167 million in NGVT’s case. Navient Corp (NASDAQ:NAVI) is the most popular stock in this table. On the other hand First Financial Bancorp (NASDAQ:FFBC) is the least popular one with only 8 bullish hedge fund positions. Ingevity Corporation (NYSE:NGVT) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on NGVT as the stock returned 49.3% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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