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How Did Entegris Inc (ENTG) Compare Against Hedge Fund Darlings in 2019?

Debasis Saha

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren't usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index's returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you'd fail to beat the market. At the same time, the 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of more than 10 percentage points in 2019. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That's why we are going to go over recent hedge fund activity in Entegris Inc (NASDAQ:ENTG).

Entegris Inc (NASDAQ:ENTG) was in 26 hedge funds' portfolios at the end of the third quarter of 2019. ENTG shareholders have witnessed an increase in activity from the world's largest hedge funds of late. There were 24 hedge funds in our database with ENTG holdings at the end of the previous quarter. Our calculations also showed that ENTG isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

If you'd ask most stock holders, hedge funds are perceived as slow, outdated financial tools of yesteryear. While there are over 8000 funds trading today, Our experts choose to focus on the leaders of this group, around 750 funds. Most estimates calculate that this group of people orchestrate bulk of the smart money's total capital, and by monitoring their first-class equity investments, Insider Monkey has brought to light a few investment strategies that have historically outstripped Mr. Market. Insider Monkey's flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points a year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

[caption id="attachment_338182" align="alignnone" width="2480"] Harold Levy of Iridian Asset Management[/caption]

Harold Levy Iridian Asset Management

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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock is still extremely cheap despite already gaining 20 percent. With all of this in mind we're going to go over the recent hedge fund action surrounding Entegris Inc (NASDAQ:ENTG).

How have hedgies been trading Entegris Inc (NASDAQ:ENTG)?

Heading into the fourth quarter of 2019, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the second quarter of 2019. By comparison, 25 hedge funds held shares or bullish call options in ENTG a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is ENTG A Good Stock To Buy?

The largest stake in Entegris Inc (NASDAQ:ENTG) was held by GMT Capital, which reported holding $300.2 million worth of stock at the end of September. It was followed by Iridian Asset Management with a $153.5 million position. Other investors bullish on the company included Cantillon Capital Management, RGM Capital, and Polar Capital. In terms of the portfolio weights assigned to each position GMT Capital allocated the biggest weight to Entegris Inc (NASDAQ:ENTG), around 11.08% of its 13F portfolio. RGM Capital is also relatively very bullish on the stock, designating 5.02 percent of its 13F equity portfolio to ENTG.

As industrywide interest jumped, some big names were breaking ground themselves. Cantillon Capital Management, managed by William von Mueffling, created the biggest position in Entegris Inc (NASDAQ:ENTG). Cantillon Capital Management had $100.7 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital also initiated a $34.4 million position during the quarter. The other funds with brand new ENTG positions are John Overdeck and David Siegel's Two Sigma Advisors, Frank Slattery's Symmetry Peak Management, and Andrew Sandler's Sandler Capital Management.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Entegris Inc (NASDAQ:ENTG) but similarly valued. These stocks are Pentair plc (NYSE:PNR), Buckeye Partners, L.P. (NYSE:BPL), Elastic N.V. (NYSE:ESTC), and Genesee & Wyoming Inc (NYSE:GWR). This group of stocks' market values are similar to ENTG's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PNR,22,415842,1 BPL,18,536490,5 ESTC,30,867426,3 GWR,31,783531,5 Average,25.25,650822,3.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.25 hedge funds with bullish positions and the average amount invested in these stocks was $651 million. That figure was $807 million in ENTG's case. Genesee & Wyoming Inc (NYSE:GWR) is the most popular stock in this table. On the other hand Buckeye Partners, L.P. (NYSE:BPL) is the least popular one with only 18 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. 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 10.1 percentage points. Hedge funds were also right about betting on ENTG as the stock returned 80.8% in 2019 and outperformed the market. Hedge funds were rewarded for their relative bullishness. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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