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 Innospec Inc. (NASDAQ:IOSP) based on those filings.
Innospec Inc. (NASDAQ:IOSP) investors should be aware of a decrease in activity from the world's largest hedge funds of late. IOSP was in 14 hedge funds' portfolios at the end of March. There were 18 hedge funds in our database with IOSP positions at the end of the previous quarter. Our calculations also showed that IOSP 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.
At the moment there are a lot of gauges stock traders employ to size up their stock investments. Two of the best gauges are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the best picks of the elite fund managers can outperform their index-focused peers by a healthy amount (see the details here).
[caption id="attachment_746893" align="aligncenter" width="400"] Paul Marshall of Marshall Wace[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology's influence will go beyond online payments. So, we are checking out this futurist's moonshot opportunities in tech stocks. 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. Now let's take a peek at the fresh hedge fund action encompassing Innospec Inc. (NASDAQ:IOSP).
Hedge fund activity in Innospec Inc. (NASDAQ:IOSP)
At Q1's end, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -22% from the previous quarter. On the other hand, there were a total of 14 hedge funds with a bullish position in IOSP a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
Among these funds, Royce & Associates held the most valuable stake in Innospec Inc. (NASDAQ:IOSP), which was worth $48.4 million at the end of the third quarter. On the second spot was Marshall Wace LLP which amassed $4.5 million worth of shares. Arrowstreet Capital, Gotham Asset Management, and GLG Partners 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 Zebra Capital Management allocated the biggest weight to Innospec Inc. (NASDAQ:IOSP), around 1.04% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, setting aside 0.66 percent of its 13F equity portfolio to IOSP.
Seeing as Innospec Inc. (NASDAQ:IOSP) has faced declining sentiment from the aggregate hedge fund industry, it's safe to say that there exists a select few money managers that elected to cut their entire stakes by the end of the first quarter. Interestingly, Mark Coe's Intrinsic Edge Capital sold off the largest investment of all the hedgies followed by Insider Monkey, comprising about $8.1 million in stock, and Israel Englander's Millennium Management was right behind this move, as the fund dropped about $1.1 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 4 funds by the end of the first quarter.
Let's now review hedge fund activity in other stocks similar to Innospec Inc. (NASDAQ:IOSP). We will take a look at Papa John's International, Inc. (NASDAQ:PZZA), Merit Medical Systems, Inc. (NASDAQ:MMSI), IGM Biosciences, Inc. (NASDAQ:IGMS), and Afya Limited (NASDAQ:AFYA). All of these stocks' market caps resemble IOSP's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PZZA,29,251238,1 MMSI,11,195740,-6 IGMS,14,517563,2 AFYA,8,54892,-1 Average,15.5,254858,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $255 million. That figure was $71 million in IOSP's case. Papa John's International, Inc. (NASDAQ:PZZA) is the most popular stock in this table. On the other hand Afya Limited (NASDAQ:AFYA) is the least popular one with only 8 bullish hedge fund positions. Innospec Inc. (NASDAQ:IOSP) is not the least popular stock in this group but hedge fund interest is still below average. 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 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 13.3% in 2020 through June 25th and surpassed the market by 16.8 percentage points. Unfortunately IOSP wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); IOSP investors were disappointed as the stock returned 6.1% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.