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Did Hedge Funds Make The Right Call On Integer Holdings Corporation (ITGR) ?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Integer Holdings Corporation (NYSE:ITGR) and determine whether hedge funds had an edge regarding this stock.

Hedge fund interest in Integer Holdings Corporation (NYSE:ITGR) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Apple Hospitality REIT Inc (NYSE:APLE), Proto Labs Inc (NYSE:PRLB), and Advanced Drainage Systems Inc. (NYSE:WMS) to gather more data points. Our calculations also showed that ITGR 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Ken Fisher FISHER ASSET MANAGEMENT

Ken Fisher of Fisher Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. With all of this in mind we’re going to take a look at the latest hedge fund action surrounding Integer Holdings Corporation (NYSE:ITGR).

What have hedge funds been doing with Integer Holdings Corporation (NYSE:ITGR)?

Heading into the second quarter of 2020, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2019. By comparison, 29 hedge funds held shares or bullish call options in ITGR a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Fisher Asset Management was the largest shareholder of Integer Holdings Corporation (NYSE:ITGR), with a stake worth $47.7 million reported as of the end of September. Trailing Fisher Asset Management was GLG Partners, which amassed a stake valued at $15.8 million. AQR Capital Management, Citadel Investment Group, and Diamond Hill Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Tamarack Capital Management allocated the biggest weight to Integer Holdings Corporation (NYSE:ITGR), around 0.24% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, dishing out 0.14 percent of its 13F equity portfolio to ITGR.

Judging by the fact that Integer Holdings Corporation (NYSE:ITGR) has experienced falling interest from the aggregate hedge fund industry, it’s safe to say that there was a specific group of funds that slashed their full holdings by the end of the first quarter. Interestingly, Paul Marshall and Ian Wace’s Marshall Wace LLP sold off the largest stake of the “upper crust” of funds monitored by Insider Monkey, totaling about $15.6 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund dropped about $8.4 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks similar to Integer Holdings Corporation (NYSE:ITGR). These stocks are Apple Hospitality REIT Inc (NYSE:APLE), Proto Labs Inc (NYSE:PRLB), Advanced Drainage Systems Inc. (NYSE:WMS), and Washington Federal Inc. (NASDAQ:WAFD). This group of stocks’ market values are closest to ITGR’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
APLE 11 74704 -4
PRLB 13 21459 3
WMS 25 368899 0
WAFD 18 42649 -1
Average 16.75 126928 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $127 million. That figure was $89 million in ITGR’s case. Advanced Drainage Systems Inc. (NYSE:WMS) is the most popular stock in this table. On the other hand Apple Hospitality REIT Inc (NYSE:APLE) is the least popular one with only 11 bullish hedge fund positions. Integer Holdings Corporation (NYSE:ITGR) is not the most popular stock in this group but hedge fund interest is still above average. 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 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 18.6% in 2020 through July 27th but beat the market by 17.1 percentage points. Unfortunately ITGR wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ITGR were disappointed as the stock returned 12.7% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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