Hedge Funds Are Betting On IPG Photonics Corporation (IPGP)

You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund managers like Jeff Ubben, George Soros and Seth Klarman hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.

IPG Photonics Corporation (NASDAQ:IPGP) was in 16 hedge funds’ portfolios at the end of the second quarter of 2019. IPGP has experienced an increase in enthusiasm from smart money recently. There were 13 hedge funds in our database with IPGP holdings at the end of the previous quarter. Our calculations also showed that IPGP isn’t among the 30 most popular stocks among hedge funds (view the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 40 percentage points since May 2014 through May 30, 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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

John Overdeck of Two Sigma

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a peek at the recent hedge fund action encompassing IPG Photonics Corporation (NASDAQ:IPGP).

How are hedge funds trading IPG Photonics Corporation (NASDAQ:IPGP)?

Heading into the third quarter of 2019, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 23% from the previous quarter. By comparison, 19 hedge funds held shares or bullish call options in IPGP a year ago. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).


More specifically, Royce & Associates was the largest shareholder of IPG Photonics Corporation (NASDAQ:IPGP), with a stake worth $32 million reported as of the end of March. Trailing Royce & Associates was Balyasny Asset Management, which amassed a stake valued at $30.4 million. Fisher Asset Management, Two Sigma Advisors, and Point72 Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.

As industrywide interest jumped, key money managers have been driving this bullishness. Point72 Asset Management, managed by Steve Cohen, assembled the largest position in IPG Photonics Corporation (NASDAQ:IPGP). Point72 Asset Management had $10 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $8.7 million investment in the stock during the quarter. The following funds were also among the new IPGP investors: Ken Griffin’s Citadel Investment Group, Israel Englander’s Millennium Management, and D. E. Shaw’s D E Shaw.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as IPG Photonics Corporation (NASDAQ:IPGP) but similarly valued. We will take a look at Zions Bancorporation, National Association (NASDAQ:ZION), Jazz Pharmaceuticals Public Limited Company (NASDAQ:JAZZ), Teradyne, Inc. (NYSE:TER), and Cypress Semiconductor Corporation (NASDAQ:CY). All of these stocks’ market caps match IPGP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ZION 35 544360 -9
JAZZ 20 744942 -7
TER 27 684058 3
CY 36 1306956 11
Average 29.5 820079 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.5 hedge funds with bullish positions and the average amount invested in these stocks was $820 million. That figure was $142 million in IPGP’s case. Cypress Semiconductor Corporation (NASDAQ:CY) is the most popular stock in this table. On the other hand Jazz Pharmaceuticals Public Limited Company (NASDAQ:JAZZ) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks IPG Photonics Corporation (NASDAQ:IPGP) is even less popular than JAZZ. Hedge funds dodged a bullet by taking a bearish stance towards IPGP. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately IPGP wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); IPGP investors were disappointed as the stock returned -12.1% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.

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