We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s take a look at whether IPG Photonics Corporation (NASDAQ:IPGP) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
IPG Photonics Corporation (NASDAQ:IPGP) was in 25 hedge funds’ portfolios at the end of the fourth quarter of 2019. IPGP has seen an increase in hedge fund interest recently. There were 17 hedge funds in our database with IPGP positions at the end of the previous quarter. Our calculations also showed that IPGP isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
If you’d ask most market participants, hedge funds are perceived as unimportant, outdated financial vehicles of years past. While there are more than 8000 funds trading at present, We look at the bigwigs of this group, about 850 funds. It is estimated that this group of investors orchestrate most of the smart money’s total capital, and by keeping track of their best stock picks, Insider Monkey has unearthed a number of investment strategies that have historically beaten the broader indices. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a gander at the recent hedge fund action encompassing IPG Photonics Corporation (NASDAQ:IPGP).
What have hedge funds been doing with IPG Photonics Corporation (NASDAQ:IPGP)?
At Q4’s end, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 47% from the previous quarter. By comparison, 16 hedge funds held shares or bullish call options in IPGP a year ago. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
Among these funds, Royce & Associates held the most valuable stake in IPG Photonics Corporation (NASDAQ:IPGP), which was worth $29.9 million at the end of the third quarter. On the second spot was Fisher Asset Management which amassed $26.6 million worth of shares. Indus Capital, Motley Fool Asset Management, and Impax Asset Management 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 Indus Capital allocated the biggest weight to IPG Photonics Corporation (NASDAQ:IPGP), around 4% of its 13F portfolio. Jade Capital Advisors is also relatively very bullish on the stock, designating 3.77 percent of its 13F equity portfolio to IPGP.
Consequently, some big names have been driving this bullishness. Indus Capital, managed by David Kowitz and Sheldon Kasowitz, created the largest position in IPG Photonics Corporation (NASDAQ:IPGP). Indus Capital had $20.4 million invested in the company at the end of the quarter. Ian Simm’s Impax Asset Management also made a $17.2 million investment in the stock during the quarter. The following funds were also among the new IPGP investors: Steve Cohen’s Point72 Asset Management, Noam Gottesman’s GLG Partners, and Robert Vincent McHugh’s Jade Capital Advisors.
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 Amarin Corporation plc (NASDAQ:AMRN), PVH Corp (NYSE:PVH), BioNTech SE (NASDAQ:BNTX), and Erie Indemnity Company (NASDAQ:ERIE). This group of stocks’ market caps resemble IPGP’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.25 hedge funds with bullish positions and the average amount invested in these stocks was $670 million. That figure was $195 million in IPGP’s case. Amarin Corporation plc (NASDAQ:AMRN) is the most popular stock in this table. On the other hand BioNTech SE (NASDAQ:BNTX) is the least popular one with only 4 bullish hedge fund positions. IPG Photonics Corporation (NASDAQ:IPGP) 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately IPGP wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on IPGP were disappointed as the stock returned -27.3% 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.