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Should You Avoid Innospec Inc. (IOSP)?

Is Innospec Inc. (NASDAQ:IOSP) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to find the latest market-moving information.

Innospec Inc. (NASDAQ:IOSP) was in 12 hedge funds’ portfolios at the end of September. IOSP has experienced a decrease in support from the world’s most elite money managers lately. There were 13 hedge funds in our database with IOSP positions at the end of the previous quarter. Our calculations also showed that IOSP isn’t among the 30 most popular stocks among hedge funds.

In the 21st century investor’s toolkit there are plenty of gauges stock traders employ to analyze their stock investments. A couple of the less known gauges are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the top picks of the top money managers can beat the S&P 500 by a healthy amount (see the details here).

Joe Huber - Huber Capital Management

We’re going to take a glance at the fresh hedge fund action encompassing Innospec Inc. (NASDAQ:IOSP).

What does the smart money think about Innospec Inc. (NASDAQ:IOSP)?

At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from the previous quarter. By comparison, 11 hedge funds held shares or bullish call options in IOSP heading into this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds With IOSP Positions

Of the funds tracked by Insider Monkey, Joe Huber’s Huber Capital Management has the number one position in Innospec Inc. (NASDAQ:IOSP), worth close to $35 million, accounting for 2.3% of its total 13F portfolio. On Huber Capital Management’s heels is Royce & Associates, led by Chuck Royce, holding a $15.7 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors that are bullish contain Noam Gottesman’s GLG Partners, Peter Algert and Kevin Coldiron’s Algert Coldiron Investors and Cliff Asness’s AQR Capital Management.

Seeing as Innospec Inc. (NASDAQ:IOSP) has experienced declining sentiment from the aggregate hedge fund industry, logic holds that there exists a select few hedge funds who were dropping their entire stakes last quarter. Interestingly, Joel Greenblatt’s Gotham Asset Management cut the biggest investment of the 700 funds tracked by Insider Monkey, comprising about $1.4 million in stock, and Alec Litowitz and Ross Laser’s Magnetar Capital was right behind this move, as the fund dumped about $0.6 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 1 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to Innospec Inc. (NASDAQ:IOSP). These stocks are Kaman Corporation (NYSE:KAMN), Agree Realty Corporation (NYSE:ADC), Hortonworks Inc (NASDAQ:HDP), and Power Integrations Inc (NASDAQ:POWI). This group of stocks’ market caps are closest to IOSP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KAMN 20 320855 4
ADC 14 71333 2
HDP 27 409365 3
POWI 9 97255 5
Average 17.5 224702 3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $225 million. That figure was $70 million in IOSP’s case. Hortonworks Inc (NASDAQ:HDP) is the most popular stock in this table. On the other hand Power Integrations Inc (NASDAQ:POWI) is the least popular one with only 9 bullish hedge fund positions. Innospec Inc. (NASDAQ:IOSP) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard HDP might be a better candidate to consider a long position.

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

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