In this article we will check out the progression of hedge fund sentiment towards Entegris Inc (NASDAQ:ENTG) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is Entegris Inc (NASDAQ:ENTG) a bargain? Investors who are in the know are turning less bullish. The number of long hedge fund bets dropped by 5 in recent months. Our calculations also showed that ENTG 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). ENTG was in 19 hedge funds’ portfolios at the end of March. There were 24 hedge funds in our database with ENTG holdings at the end of the previous quarter.
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.
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 let’s review the key hedge fund action surrounding Entegris Inc (NASDAQ:ENTG).
How have hedgies been trading Entegris Inc (NASDAQ:ENTG)?
At the end of the first quarter, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -21% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ENTG over the last 18 quarters. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
Among these funds, GMT Capital held the most valuable stake in Entegris Inc (NASDAQ:ENTG), which was worth $177.7 million at the end of the third quarter. On the second spot was Cantillon Capital Management which amassed $118.3 million worth of shares. Iridian Asset Management, RGM Capital, and Royce & Associates 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 9.98% of its 13F portfolio. RGM Capital is also relatively very bullish on the stock, designating 3.31 percent of its 13F equity portfolio to ENTG.
Due to the fact that Entegris Inc (NASDAQ:ENTG) has witnessed a decline in interest from the smart money, it’s safe to say that there were a few hedgies that elected to cut their full holdings in the first quarter. Interestingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dumped the biggest position of the “upper crust” of funds tracked by Insider Monkey, valued at close to $50.7 million in stock. Brian Ashford-Russell and Tim Woolley’s fund, Polar Capital, also sold off its stock, about $28.5 million worth. These transactions are interesting, as total hedge fund interest dropped by 5 funds in the first quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Entegris Inc (NASDAQ:ENTG) but similarly valued. We will take a look at Omega Healthcare Investors Inc (NYSE:OHI), 10x Genomics, Inc. (NASDAQ:TXG), PulteGroup, Inc. (NYSE:PHM), and GCI Liberty, Inc. (NASDAQ:GLIBA). All of these stocks’ market caps match ENTG’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 30.5 hedge funds with bullish positions and the average amount invested in these stocks was $655 million. That figure was $488 million in ENTG’s case. GCI Liberty, Inc. (NASDAQ:GLIBA) is the most popular stock in this table. On the other hand Omega Healthcare Investors Inc (NYSE:OHI) is the least popular one with only 17 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 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 13.4% in 2020 through June 22nd and still beat the market by 15.9 percentage points. A small number of hedge funds were also right about betting on ENTG as the stock returned 36.6% during the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.