Do Hedge Funds Love Ingevity Corporation (NGVT)?

At Insider Monkey, we pore over the filings of nearly 866 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of March 31st. In this article, we will use that wealth of knowledge to determine whether or not Ingevity Corporation (NYSE:NGVT) makes for a good investment right now.

Ingevity Corporation (NYSE:NGVT) has seen a decrease in activity from the world’s largest hedge funds recently. Ingevity Corporation (NYSE:NGVT) was in 20 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 31. Our calculations also showed that NGVT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.


Jeffrey Ubben of ValueAct Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to take a look at the key hedge fund action encompassing Ingevity Corporation (NYSE:NGVT).

Do Hedge Funds Think NGVT Is A Good Stock To Buy Now?

At the end of March, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from one quarter earlier. By comparison, 29 hedge funds held shares or bullish call options in NGVT a year ago. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

More specifically, Broad Bay Capital was the largest shareholder of Ingevity Corporation (NYSE:NGVT), with a stake worth $89.1 million reported as of the end of March. Trailing Broad Bay Capital was D E Shaw, which amassed a stake valued at $52.6 million. Inclusive Capital, Maple Rock Capital, and Ararat 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 Broad Bay Capital allocated the biggest weight to Ingevity Corporation (NYSE:NGVT), around 10.42% of its 13F portfolio. Ararat Capital is also relatively very bullish on the stock, designating 6 percent of its 13F equity portfolio to NGVT.

Because Ingevity Corporation (NYSE:NGVT) has faced falling interest from the aggregate hedge fund industry, logic holds that there was a specific group of hedge funds that slashed their entire stakes by the end of the first quarter. Interestingly, Renaissance Technologies cut the biggest position of the “upper crust” of funds tracked by Insider Monkey, comprising about $5.2 million in stock, and Minhua Zhang’s Weld Capital Management was right behind this move, as the fund cut about $0.8 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 4 funds by the end of the first quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Ingevity Corporation (NYSE:NGVT) but similarly valued. These stocks are Cathay General Bancorp (NASDAQ:CATY), Turquoise Hill Resources Ltd (NYSE:TRQ), Canaan Inc. (NASDAQ:CAN), CNX Resources Corporation (NYSE:CNX), Arvinas, Inc. (NASDAQ:ARVN), Brinker International, Inc. (NYSE:EAT), and Assured Guaranty Ltd. (NYSE:AGO). This group of stocks’ market values match NGVT’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CATY 12 130599 2
TRQ 13 575312 1
CAN 9 47017 5
CNX 23 607003 -2
ARVN 28 365585 -6
EAT 31 475033 3
AGO 22 192881 5
Average 19.7 341919 1.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.7 hedge funds with bullish positions and the average amount invested in these stocks was $342 million. That figure was $280 million in NGVT’s case. Brinker International, Inc. (NYSE:EAT) is the most popular stock in this table. On the other hand Canaan Inc. (NASDAQ:CAN) is the least popular one with only 9 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 overall hedge fund sentiment score for NGVT is 45.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately NGVT wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on NGVT were disappointed as the stock returned 4.6% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

Follow Ingevity Corp (NYSE:NGVT)

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