We can judge whether IPG Photonics Corporation (NASDAQ:IPGP) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
IPG Photonics Corporation (NASDAQ:IPGP) has seen a decrease in support from the world’s most elite money managers lately. IPGP was in 14 hedge funds’ portfolios at the end of September. There were 16 hedge funds in our database with IPGP holdings at the end of the previous quarter. Our calculations also showed that IPGP isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to 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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
John Overdeck of Two Sigma Advisors
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. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a look at the recent hedge fund action encompassing IPG Photonics Corporation (NASDAQ:IPGP).
How have hedgies been trading IPG Photonics Corporation (NASDAQ:IPGP)?
Heading into the fourth quarter of 2019, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from one quarter earlier. On the other hand, there were a total of 16 hedge funds with a bullish position in IPGP 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.
Among these funds, Royce & Associates held the most valuable stake in IPG Photonics Corporation (NASDAQ:IPGP), which was worth $28.2 million at the end of the third quarter. On the second spot was Fisher Asset Management which amassed $26.3 million worth of shares. Two Sigma Advisors, Citadel Investment Group, and HBK Investments 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 Quantinno Capital allocated the biggest weight to IPG Photonics Corporation (NASDAQ:IPGP), around 0.39% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, earmarking 0.26 percent of its 13F equity portfolio to IPGP.
Due to the fact that IPG Photonics Corporation (NASDAQ:IPGP) has experienced bearish sentiment from hedge fund managers, it’s easy to see that there lies a certain “tier” of funds that decided to sell off their positions entirely by the end of the third quarter. At the top of the heap, Dmitry Balyasny’s Balyasny Asset Management sold off the biggest stake of the 750 funds tracked by Insider Monkey, totaling an estimated $30.4 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund dropped about $10 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 2 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as IPG Photonics Corporation (NASDAQ:IPGP) but similarly valued. These stocks are Lear Corporation (NYSE:LEA), Cable One Inc (NYSE:CABO), Jones Lang LaSalle Incorporated (NYSE:JLL), and Old Republic International Corporation (NYSE:ORI). All of these stocks’ market caps match IPGP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LEA | 33 | 817858 | 2 |
| CABO | 13 | 495048 | -2 |
| JLL | 26 | 1081252 | 3 |
| ORI | 17 | 417709 | -4 |
| Average | 22.25 | 702967 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.25 hedge funds with bullish positions and the average amount invested in these stocks was $703 million. That figure was $104 million in IPGP’s case. Lear Corporation (NYSE:LEA) is the most popular stock in this table. On the other hand Cable One Inc (NYSE:CABO) is the least popular one with only 13 bullish hedge fund positions. IPG Photonics Corporation (NASDAQ:IPGP) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately IPGP wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); IPGP investors were disappointed as the stock returned 4.8% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
