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 Ingredion Incorporated (NYSE:INGR) and determine whether hedge funds skillfully traded this stock.
Ingredion Incorporated (NYSE:INGR) investors should pay attention to an increase in support from the world’s most elite money managers recently. Ingredion Incorporated (NYSE:INGR) was in 22 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 29. Our calculations also showed that INGR 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.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this lithium company which could also benefit from the electric car adoption. 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. Now we’re going to take a look at the key hedge fund action regarding Ingredion Incorporated (NYSE:INGR).
What does smart money think about Ingredion Incorporated (NYSE:INGR)?
At second quarter’s end, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from one quarter earlier. On the other hand, there were a total of 21 hedge funds with a bullish position in INGR 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, AQR Capital Management was the largest shareholder of Ingredion Incorporated (NYSE:INGR), with a stake worth $98 million reported as of the end of September. Trailing AQR Capital Management was Yacktman Asset Management, which amassed a stake valued at $67.7 million. Millennium Management, Balyasny Asset Management, and Renaissance Technologies 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 Yacktman Asset Management allocated the biggest weight to Ingredion Incorporated (NYSE:INGR), around 1.08% of its 13F portfolio. AQR Capital Management is also relatively very bullish on the stock, dishing out 0.16 percent of its 13F equity portfolio to INGR.
With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Yacktman Asset Management, managed by Donald Yacktman, created the biggest position in Ingredion Incorporated (NYSE:INGR). Yacktman Asset Management had $67.7 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $13.9 million position during the quarter. The following funds were also among the new INGR investors: Dmitry Balyasny’s Balyasny Asset Management, Donald Sussman’s Paloma Partners, and Richard S. Pzena’s Pzena Investment Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Ingredion Incorporated (NYSE:INGR) but similarly valued. We will take a look at Kimco Realty Corp (NYSE:KIM), Teck Resources Ltd (NYSE:TECK), SolarWinds Corporation (NYSE:SWI), Casey’s General Stores, Inc. (NASDAQ:CASY), LHC Group, Inc. (NASDAQ:LHCG), Prosperity Bancshares, Inc. (NYSE:PB), and Legend Biotech Corporation (NASDAQ:LEGN). All of these stocks’ market caps match INGR’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 25.7 hedge funds with bullish positions and the average amount invested in these stocks was $548 million. That figure was $227 million in INGR’s case. LHC Group, Inc. (NASDAQ:LHCG) is the most popular stock in this table. On the other hand SolarWinds Corporation (NYSE:SWI) is the least popular one with only 19 bullish hedge fund positions. Ingredion Incorporated (NYSE:INGR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for INGR 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 negative signal and 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 24.8% in 2020 through the end of September and surpassed the market by 19.3 percentage points. Unfortunately INGR wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); INGR investors were disappointed as the stock returned -8% in 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.