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Hedge Funds Are Buying Entegris Inc (ENTG)

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Entegris Inc (NASDAQ:ENTG) and determine whether hedge funds skillfully traded this stock.

Entegris Inc (NASDAQ:ENTG) has experienced an increase in hedge fund interest lately. Entegris Inc (NASDAQ:ENTG) was in 28 hedge funds’ portfolios at the end of June. The all time high for this statistics is 30. Our calculations also showed that ENTG isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

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’ 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 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Harold Levy Iridian Asset Management

Harold Levy of Iridian Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. With all of this in mind we’re going to take a peek at the new hedge fund action surrounding Entegris Inc (NASDAQ:ENTG).

How are hedge funds trading Entegris Inc (NASDAQ:ENTG)?

At second quarter’s end, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 47% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in ENTG over the last 20 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Cantillon Capital Management was the largest shareholder of Entegris Inc (NASDAQ:ENTG), with a stake worth $157.1 million reported as of the end of September. Trailing Cantillon Capital Management was Select Equity Group, which amassed a stake valued at $120.3 million. GMT Capital, Iridian Asset Management, and RGM 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 GMT Capital allocated the biggest weight to Entegris Inc (NASDAQ:ENTG), around 5.71% of its 13F portfolio. Nishkama Capital is also relatively very bullish on the stock, setting aside 3.77 percent of its 13F equity portfolio to ENTG.

As aggregate interest increased, key money managers have been driving this bullishness. Select Equity Group, managed by Robert Joseph Caruso, established the most valuable position in Entegris Inc (NASDAQ:ENTG). Select Equity Group had $120.3 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $12.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Ravee Mehta’s Nishkama Capital, Michael Gelband’s ExodusPoint Capital, and Donald Sussman’s Paloma Partners.

Let’s go over hedge fund activity in other stocks similar to Entegris Inc (NASDAQ:ENTG). We will take a look at NRG Energy Inc (NYSE:NRG), Globe Life Inc. (NYSE:GL), Universal Health Services, Inc. (NYSE:UHS), Paylocity Holding Corp (NASDAQ:PCTY), Regency Centers Corp (NASDAQ:REG), Generac Holdings Inc. (NYSE:GNRC), and Elastic N.V. (NYSE:ESTC). This group of stocks’ market values resemble ENTG’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NRG 36 1095466 -2
GL 33 706101 11
UHS 38 446238 8
PCTY 24 476733 -9
REG 15 124124 -3
GNRC 36 473108 7
ESTC 43 1385856 10
Average 32.1 672518 3.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.1 hedge funds with bullish positions and the average amount invested in these stocks was $673 million. That figure was $601 million in ENTG’s case. Elastic N.V. (NYSE:ESTC) is the most popular stock in this table. On the other hand Regency Centers Corp (NYSE:REG) is the least popular one with only 15 bullish hedge fund positions. Entegris Inc (NASDAQ:ENTG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ENTG is 61.2. 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. 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 21.3% in 2020 through September 25th and still beat the market by 17.7 percentage points. A small number of hedge funds were also right about betting on ENTG as the stock returned 17.4% since the end of June (through September 25th) and outperformed the market by an even larger margin.

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