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Is IPG Photonics Corporation (IPGP) Going to Burn These Hedge Funds?

There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other elite funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze IPG Photonics Corporation (NASDAQ:IPGP).

Is IPG Photonics Corporation (NASDAQ:IPGP) a superb investment now? Hedge funds are reducing their bets on the stock. The number of bullish hedge fund bets retreated by 3 in recent months. Our calculations also showed that IPGP isn’t among the 30 most popular stocks among hedge funds. IPGP was in 16 hedge funds’ portfolios at the end of September. There were 19 hedge funds in our database with IPGP holdings at the end of the previous quarter.

To most market participants, hedge funds are assumed to be worthless, old investment vehicles of years past. While there are more than 8,000 funds with their doors open at present, Our researchers look at the crème de la crème of this group, about 700 funds. These hedge fund managers orchestrate the majority of the hedge fund industry’s total asset base, and by following their best equity investments, Insider Monkey has come up with a few investment strategies that have historically outperformed the S&P 500 index. Insider Monkey’s flagship hedge fund strategy outperformed the S&P 500 index by 6 percentage points per year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 24% since February 2017 (through December 3rd) even though the market was up nearly 23% during the same period. We just shared a list of 11 short targets in our latest quarterly update.

Chuck Royce

Let’s review the latest hedge fund action regarding IPG Photonics Corporation (NASDAQ:IPGP).

How have hedgies been trading IPG Photonics Corporation (NASDAQ:IPGP)?

At the end of the third quarter, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of -16% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards IPGP over the last 13 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds IPGP Positions

More specifically, AQR Capital Management was the largest shareholder of IPG Photonics Corporation (NASDAQ:IPGP), with a stake worth $111 million reported as of the end of September. Trailing AQR Capital Management was Citadel Investment Group, which amassed a stake valued at $39.7 million. Royce & Associates, Keywise Capital Management, and Renaissance Technologies were also very fond of the stock, giving the stock large weights in their portfolios.

Due to the fact that IPG Photonics Corporation (NASDAQ:IPGP) has experienced bearish sentiment from the aggregate hedge fund industry, we can see that there exists a select few funds who sold off their entire stakes by the end of the third quarter. Interestingly, Israel Englander’s Millennium Management dumped the largest investment of the 700 funds tracked by Insider Monkey, valued at about $8.3 million in stock. Louis Navellier’s fund, Navellier & Associates, also said goodbye to its stock, about $7 million worth. These moves are interesting, as total hedge fund interest fell by 3 funds by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks similar to IPG Photonics Corporation (NASDAQ:IPGP). These stocks are Credit Acceptance Corp. (NASDAQ:CACC), WPX Energy Inc (NYSE:WPX), SL Green Realty Corp (NYSE:SLG), and Energen Corporation (NYSE:EGN). This group of stocks’ market valuations are similar to IPGP’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CACC 20 1204887 4
WPX 53 1247025 13
SLG 18 79729 0
EGN 34 2174130 1
Average 31.25 1176443 4.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.25 hedge funds with bullish positions and the average amount invested in these stocks was $1.18 billion. That figure was $287 million in IPGP’s case. WPX Energy Inc (NYSE:WPX) is the most popular stock in this table. On the other hand SL Green Realty Corp (NYSE:SLG) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks IPG Photonics Corporation (NASDAQ:IPGP) is even less popular than SLG. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

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

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