Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 5.2% in the 12 months ending October 30, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of September 2014) generated a return of 9.5% during the same 12-month period, with 63% of these stock picks outperformed the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 16-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Entegris Inc (NASDAQ:ENTG).
Entegris Inc (NASDAQ:ENTG) investors should be aware of an increase in hedge fund sentiment of late, with 19 hedge funds in Insider Monkey’s database owning shares. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Black Hills Corp (NYSE:BKH), Alliance Holdings GP, L.P. (NASDAQ:AHGP), and The Dolan Company (NYSE:DM) to gather more data points.
In the 21st century investor’s toolkit there are many gauges market participants can use to evaluate publicly traded companies. A couple of the most underrated gauges are hedge fund and insider trading indicators. We have shown that, historically, those who follow the best picks of the elite investment managers can beat the market by a healthy amount (see the details here).
Now, we’re going to go over the recent action regarding Entegris Inc (NASDAQ:ENTG).
How have hedgies been trading Entegris Inc (NASDAQ:ENTG)?
At Q3’s end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 36% rise from the second quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their holdings meaningfully (or had already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Thomas E. Claugus’ GMT Capital has the number one position in Entegris Inc (NASDAQ:ENTG), worth close to $213.8 million, accounting for 5.4% of its total 13F portfolio. On GMT Capital’s heels is Clifton S. Robbins’ Blue Harbour Group, with a $59 million position; 1.8% of its 13F portfolio is allocated to the company. Remaining peers that are bullish contain Mariko Gordon’s Daruma Asset Management, Robert G. Moses’ RGM Capital, and Jeffrey Moskowitz’s Harvey Partners.
Now, key hedge funds were leading the bulls’ herd. HighVista Strategies, managed by Andre F. Perold, established the largest position in Entegris Inc (NASDAQ:ENTG). HighVista Strategies had $3.9 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $1.5 million position during the quarter. The other funds with brand new ENTG positions are Mike Vranos’ Ellington, Matthew Tewksbury’s Stevens Capital Management, and Chao Ku’s Nine Chapters Capital Management.
Let’s now take a look at hedge fund activity in other stocks similar to Entegris Inc (NASDAQ:ENTG). These stocks are Black Hills Corp (NYSE:BKH), Alliance Holdings GP, L.P. (NASDAQ:AHGP), The Dolan Company (NYSE:DM), and Masonite International Corp (NYSE:DOOR). This group of stocks’ market valuations are closest to ENTG’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $179 million. That figure was $397 million in ENTG’s case. Masonite International Corp (NYSE:DOOR) is the most popular stock in this table. On the other hand The Dolan Company (NYSE:DM) is the least popular one with only 6 bullish hedge fund positions. Entegris Inc (NASDAQ:ENTG) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard DOOR might be a better candidate to consider a long position in.