Where Do Hedge Funds Stand On IPG Photonics Corporation (IPGP)?

In this article we will analyze 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 by double digits annually.

Is IPG Photonics Corporation (NASDAQ:IPGP) the right pick for your portfolio? The best stock pickers were turning bullish. The number of bullish hedge fund positions went up by 6 in recent months. IPG Photonics Corporation (NASDAQ:IPGP) was in 31 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 30. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that IPGP isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 25 hedge funds in our database with IPGP holdings at the end of December.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Chuck Royce

Chuck Royce of Royce & Associates

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we’re going to review the latest hedge fund action regarding IPG Photonics Corporation (NASDAQ:IPGP).

Do Hedge Funds Think IPGP Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 24% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards IPGP over the last 23 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Fundsmith LLP was the largest shareholder of IPG Photonics Corporation (NASDAQ:IPGP), with a stake worth $132.9 million reported as of the end of March. Trailing Fundsmith LLP was Impax Asset Management, which amassed a stake valued at $92.4 million. Royce & Associates, Fisher Asset Management, and Motley Fool Asset Management 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 Motley Fool Asset Management allocated the biggest weight to IPG Photonics Corporation (NASDAQ:IPGP), around 1.85% of its 13F portfolio. Jade Capital Advisors is also relatively very bullish on the stock, designating 0.63 percent of its 13F equity portfolio to IPGP.

As aggregate interest increased, key money managers have been driving this bullishness. Sandler Capital Management, managed by Andrew Sandler, initiated the most outsized position in IPG Photonics Corporation (NASDAQ:IPGP). Sandler Capital Management had $5.9 million invested in the company at the end of the quarter. Alec Litowitz and Ross Laser’s Magnetar Capital also initiated a $2.3 million position during the quarter. The other funds with brand new IPGP positions are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Robert Vincent McHugh’s Jade Capital Advisors, and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s check out hedge fund activity in other stocks similar to IPG Photonics Corporation (NASDAQ:IPGP). We will take a look at Bausch Health Companies Inc. (NYSE:BHC), Qiagen NV (NYSE:QGEN), Globe Life Inc. (NYSE:GL), Bunge Limited (NYSE:BG), The Gap Inc. (NYSE:GPS), Universal Display Corporation (NASDAQ:OLED), and Playtika Holding Corp. (NASDAQ:PLTK). This group of stocks’ market values resemble IPGP’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BHC 42 4076779 -1
QGEN 27 562548 3
GL 33 844018 2
BG 44 653455 -7
GPS 42 988959 4
OLED 17 95398 -7
PLTK 21 444574 21
Average 32.3 1095104 2.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.3 hedge funds with bullish positions and the average amount invested in these stocks was $1095 million. That figure was $416 million in IPGP’s case. Bunge Limited (NYSE:BG) is the most popular stock in this table. On the other hand Universal Display Corporation (NASDAQ:OLED) is the least popular one with only 17 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. Our overall hedge fund sentiment score for IPGP is 65.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.8% in 2021 through July 2nd and surpassed the market again by 6 percentage points. Unfortunately IPGP wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); IPGP investors were disappointed as the stock returned 0.1% since the end of March (through 7/2) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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