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At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Catalent Inc (NYSE:CTLT).
Is CTLT a good stock to buy now? Catalent Inc (NYSE:CTLT) shareholders have witnessed an increase in enthusiasm from smart money in recent months. Catalent Inc (NYSE:CTLT) was in 40 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 35. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that CTLT isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Kamran Moghtaderi of Eversept Partners
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 website. Now we're going to check out the recent hedge fund action encompassing Catalent Inc (NYSE:CTLT).
Do Hedge Funds Think CTLT Is A Good Stock To Buy Now?
At third quarter's end, a total of 40 of the hedge funds tracked by Insider Monkey were long this stock, a change of 14% from one quarter earlier. On the other hand, there were a total of 29 hedge funds with a bullish position in CTLT a year ago. With hedgies' capital changing hands, there exists a select group of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
The largest stake in Catalent Inc (NYSE:CTLT) was held by Viking Global, which reported holding $101.6 million worth of stock at the end of September. It was followed by Suvretta Capital Management with a $97.4 million position. Other investors bullish on the company included Millennium Management, Marshall Wace LLP, and Tower House Partners. In terms of the portfolio weights assigned to each position Tower House Partners allocated the biggest weight to Catalent Inc (NYSE:CTLT), around 23.11% of its 13F portfolio. Iron Triangle Partners is also relatively very bullish on the stock, dishing out 5.36 percent of its 13F equity portfolio to CTLT.
With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Adage Capital Management, managed by Phill Gross and Robert Atchinson, established the largest position in Catalent Inc (NYSE:CTLT). Adage Capital Management had $13.4 million invested in the company at the end of the quarter. Kamran Moghtaderi's Eversept Partners also initiated a $12 million position during the quarter. The other funds with new positions in the stock are Krishen Sud's Sivik Global Healthcare, Brian Ashford-Russell and Tim Woolley's Polar Capital, and Noam Gottesman's GLG Partners.
Let's check out hedge fund activity in other stocks similar to Catalent Inc (NYSE:CTLT). We will take a look at Brookfield Infrastructure Partners L.P. (NYSE:BIP), Tiffany & Co. (NYSE:TIF), Wix.Com Ltd (NASDAQ:WIX), PerkinElmer, Inc. (NYSE:PKI), Tyler Technologies, Inc. (NYSE:TYL), Nomura Holdings, Inc. (NYSE:NMR), and Royal Caribbean Group (NYSE:RCL). This group of stocks' market valuations are similar to CTLT's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BIP,13,50744,1 TIF,61,2294401,-3 WIX,36,1104994,9 PKI,36,1750632,6 TYL,31,520210,-5 NMR,6,18282,1 RCL,30,418133,-1 Average,30.4,879628,1.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.4 hedge funds with bullish positions and the average amount invested in these stocks was $880 million. That figure was $618 million in CTLT's case. Tiffany & Co. (NYSE:TIF) is the most popular stock in this table. On the other hand Nomura Holdings, Inc. (NYSE:NMR) is the least popular one with only 6 bullish hedge fund positions. Catalent Inc (NYSE:CTLT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CTLT is 70.9. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on CTLT as the stock returned 14.3% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.