Is Catalent Inc (CTLT) Going to Burn These Hedge Funds?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards Catalent Inc (NYSE:CTLT).

Catalent Inc (NYSE:CTLT) was in 27 hedge funds’ portfolios at the end of the first quarter of 2020. CTLT has seen an increase in hedge fund interest lately. There were 21 hedge funds in our database with CTLT positions at the end of the previous quarter. Our calculations also showed that CTLT isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Andreas Halvorsen

Andreas Halvorsen of Viking Global

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a peek at the recent hedge fund action regarding Catalent Inc (NYSE:CTLT).

Hedge fund activity in Catalent Inc (NYSE:CTLT)

At the end of the first quarter, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 29% from the fourth quarter of 2019. By comparison, 15 hedge funds held shares or bullish call options in CTLT a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Viking Global was the largest shareholder of Catalent Inc (NYSE:CTLT), with a stake worth $100.7 million reported as of the end of September. Trailing Viking Global was Citadel Investment Group, which amassed a stake valued at $91.8 million. Highline Capital Management, Redmile Group, and Millennium 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 Pinz Capital allocated the biggest weight to Catalent Inc (NYSE:CTLT), around 9.39% of its 13F portfolio. Highline Capital Management is also relatively very bullish on the stock, earmarking 7.58 percent of its 13F equity portfolio to CTLT.

As one would reasonably expect, key hedge funds have jumped into Catalent Inc (NYSE:CTLT) headfirst. Redmile Group, managed by Jeremy Green, assembled the biggest position in Catalent Inc (NYSE:CTLT). Redmile Group had $26.3 million invested in the company at the end of the quarter. Robert B. Gillam’s McKinley Capital Management also initiated a $13.1 million position during the quarter. The other funds with brand new CTLT positions are Kevin Molloy’s Iron Triangle Partners, Bhagwan Jay Rao’s Integral Health Asset Management, and Alec Litowitz and Ross Laser’s Magnetar Capital.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Catalent Inc (NYSE:CTLT) but similarly valued. These stocks are Citizens Financial Group Inc (NYSE:CFG), Shaw Communications Inc (NYSE:SJR), Neurocrine Biosciences, Inc. (NASDAQ:NBIX), and Trimble Inc. (NASDAQ:TRMB). All of these stocks’ market caps are closest to CTLT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CFG 46 828393 4
SJR 12 152105 0
NBIX 38 1054891 -4
TRMB 20 891932 -10
Average 29 731830 -2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $732 million. That figure was $385 million in CTLT’s case. Citizens Financial Group Inc (NYSE:CFG) is the most popular stock in this table. On the other hand Shaw Communications Inc (NYSE:SJR) is the least popular one with only 12 bullish hedge fund positions. Catalent Inc (NYSE:CTLT) is not the least popular stock in this group but hedge fund interest is still below average. 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 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on CTLT as the stock returned 49.6% during the second quarter and outperformed the market by an even larger margin.

Follow Catalent Inc. (NYSE:CTLT)

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