How Intrepid Potash, Inc. (IPI) Stacks Up Against Its Peers

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

Intrepid Potash, Inc. (NYSE:IPI) has seen a decrease in hedge fund interest of late. There were 8 hedge funds in our database with IPI holdings at the end of the second quarter, 2 more than there were a quarter later. At the end of this article we will also compare IPI to other stocks including Richardson Electronics, Ltd. (NASDAQ:RELL), Recro Pharma Inc (NASDAQ:REPH), and USA Truck, Inc. (NASDAQ:USAK) to get a better sense of its popularity.

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We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.

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What does the smart money think about Intrepid Potash, Inc. (NYSE:IPI)?

Heading into the fourth quarter of 2016, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a fall of 25% from the second quarter of 2016, and the fourth-straight quarter with a decline in the number of bullish hedge fund positions. The graph below displays the number of hedge funds with bullish positions in IPI over the last 5 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).


According to Insider Monkey’s hedge fund database, Renaissance Technologies, one of the largest hedge funds in the world, has the biggest position in Intrepid Potash, Inc. (NYSE:IPI), worth close to $4 million. The second most bullish fund manager is David E. Shaw’s D E Shaw, holding a $2.4 million position. Other professional money managers with similar optimism include Chuck Royce’s Royce & Associates, Israel Englander’s Millennium Management, and John Overdeck and David Siegel’s Two Sigma Advisors. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds, which is based on the performance of their 13F long positions in non-micro-cap stocks.

Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that said goodbye to their entire stakes in the stock during the third quarter. Interestingly, Howard Guberman’s Gruss Asset Management said goodbye to the biggest position of all the investors studied by Insider Monkey, valued at close to $1.6 million in stock, and Cliff Asness’ AQR Capital Management was right behind this move, as the fund dropped about $0.3 million worth of shares.

Let’s go over hedge fund activity in other stocks similar to Intrepid Potash, Inc. (NYSE:IPI). We will take a look at Richardson Electronics, Ltd. (NASDAQ:RELL), Recro Pharma Inc (NASDAQ:REPH), USA Truck, Inc. (NASDAQ:USAK), and Alphatec Holdings Inc (NASDAQ:ATEC). This group of stocks’ market caps match IPI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RELL 4 22924 0
REPH 10 40589 10
USAK 5 12339 -3
ATEC 4 6475 0

As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $21 million. That figure was $7 million in IPI’s case. Recro Pharma Inc (NASDAQ:REPH) is the most popular stock in this table. On the other hand Richardson Electronics, Ltd. (NASDAQ:RELL) is the least popular one with only 4 bullish hedge fund positions. Intrepid Potash, Inc. (NYSE:IPI) 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. In this regard REPH might be a better candidate to consider taking a long position in.

Disclosure: None