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The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Intrepid Potash, Inc. (NYSE:IPI) based on those filings.
Intrepid Potash, Inc. (NYSE:IPI) has experienced a decrease in hedge fund interest recently. Our calculations also showed that IPI isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
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 58 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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Ken Griffin of Citadel Investment Group[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's analyze the key hedge fund action surrounding Intrepid Potash, Inc. (NYSE:IPI).
Hedge fund activity in Intrepid Potash, Inc. (NYSE:IPI)
Heading into the second quarter of 2020, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of -38% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards IPI over the last 18 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
Among these funds, Royce & Associates held the most valuable stake in Intrepid Potash, Inc. (NYSE:IPI), which was worth $1.5 million at the end of the third quarter. On the second spot was Millennium Management which amassed $1 million worth of shares. Prescott Group Capital Management, Renaissance Technologies, and Citadel Investment Group 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 Prescott Group Capital Management allocated the biggest weight to Intrepid Potash, Inc. (NYSE:IPI), around 0.28% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, earmarking 0.02 percent of its 13F equity portfolio to IPI.
Since Intrepid Potash, Inc. (NYSE:IPI) has faced bearish sentiment from the smart money, it's safe to say that there exists a select few fund managers that elected to cut their entire stakes in the first quarter. Intriguingly, Scott Wallace's Wallace Capital Management sold off the biggest stake of the "upper crust" of funds monitored by Insider Monkey, valued at about $1.9 million in stock, and David Harding's Winton Capital Management was right behind this move, as the fund cut about $0.4 million worth. These transactions are interesting, as total hedge fund interest fell by 5 funds in the first quarter.
Let's go over hedge fund activity in other stocks similar to Intrepid Potash, Inc. (NYSE:IPI). These stocks are Fiesta Restaurant Group Inc (NASDAQ:FRGI), 22nd Century Group, Inc (NYSE:XXII), GasLog Partners LP (NYSE:GLOP), and Citi Trends, Inc. (NASDAQ:CTRN). This group of stocks' market valuations are similar to IPI's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FRGI,12,43524,-2 XXII,1,384,0 GLOP,6,4758,-1 CTRN,15,18176,3 Average,8.5,16711,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $17 million. That figure was $4 million in IPI's case. Citi Trends, Inc. (NASDAQ:CTRN) is the most popular stock in this table. On the other hand 22nd Century Group, Inc (NYSE:XXII) is the least popular one with only 1 bullish hedge fund positions. Intrepid Potash, Inc. (NYSE:IPI) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.2% in 2020 through June 17th and still beat the market by 14.8 percentage points. A small number of hedge funds were also right about betting on IPI as the stock returned 47.5% during the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.