The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Innospec Inc. (NASDAQ:IOSP).
Innospec Inc. (NASDAQ:IOSP) was in 19 hedge funds' portfolios at the end of September. IOSP has seen an increase in hedge fund interest of late. There were 13 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 Q3 rankings and see the video below for Q2 rankings). Video: Click the image to 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 hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_26092" align="aligncenter" width="482"] Joel Greenblatt of Gotham Asset Management[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to take a glance at the new hedge fund action surrounding Innospec Inc. (NASDAQ:IOSP).
How are hedge funds trading Innospec Inc. (NASDAQ:IOSP)?
Heading into the fourth quarter of 2019, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 46% from one quarter earlier. By comparison, 12 hedge funds held shares or bullish call options in IOSP a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Royce & Associates held the most valuable stake in Innospec Inc. (NASDAQ:IOSP), which was worth $55.6 million at the end of the third quarter. On the second spot was Huber Capital Management which amassed $11.9 million worth of shares. Millennium Management, GLG Partners, and Gotham 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 Huber Capital Management allocated the biggest weight to Innospec Inc. (NASDAQ:IOSP), around 1.48% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, setting aside 0.95 percent of its 13F equity portfolio to IOSP.
Consequently, specific money managers have been driving this bullishness. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the most valuable position in Innospec Inc. (NASDAQ:IOSP). Arrowstreet Capital had $2.6 million invested in the company at the end of the quarter. Minhua Zhang's Weld Capital Management also initiated a $0.9 million position during the quarter. The following funds were also among the new IOSP investors: John Overdeck and David Siegel's Two Sigma Advisors, Paul Marshall and Ian Wace's Marshall Wace, and Donald Sussman's Paloma Partners.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Innospec Inc. (NASDAQ:IOSP) but similarly valued. These stocks are Zai Lab Limited (NASDAQ:ZLAB), Amkor Technology, Inc. (NASDAQ:AMKR), Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN), and PQ Group Holdings Inc. (NYSE:PQG). This group of stocks' market valuations match IOSP's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ZLAB,21,264048,4 AMKR,25,116243,6 BHVN,34,455638,-4 PQG,7,55742,1 Average,21.75,222918,1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $223 million. That figure was $99 million in IOSP's case. Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN) is the most popular stock in this table. On the other hand PQ Group Holdings Inc. (NYSE:PQG) is the least popular one with only 7 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on IOSP as the stock returned 11% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.