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Hedge Funds Are Piling Into Catalent Inc (CTLT)

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In this article we are going to use hedge fund sentiment as a tool and determine whether Catalent Inc (NYSE:CTLT) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Catalent Inc (NYSE:CTLT) was in 40 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 40. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. CTLT investors should pay attention to an increase in support from the world's most elite money managers lately. There were 29 hedge funds in our database with CTLT holdings at the end of March. Our calculations also showed that CTLT isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

TUDOR INVESTMENT CORP
TUDOR INVESTMENT CORP

Paul Tudor Jones of Tudor Investment Corp

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now we're going to take a gander at the key hedge fund action surrounding Catalent Inc (NYSE:CTLT).

Do Hedge Funds Think CTLT Is A Good Stock To Buy Now?

At Q2's end, a total of 40 of the hedge funds tracked by Insider Monkey were long this stock, a change of 38% from the first quarter of 2020. By comparison, 35 hedge funds held shares or bullish call options in CTLT 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.

Among these funds, Citadel Investment Group held the most valuable stake in Catalent Inc (NYSE:CTLT), which was worth $159.7 million at the end of the second quarter. On the second spot was Third Point which amassed $132.4 million worth of shares. Viking Global, Millennium Management, and Iron Triangle 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 Tower House Partners allocated the biggest weight to Catalent Inc (NYSE:CTLT), around 23.34% of its 13F portfolio. Iron Triangle Partners is also relatively very bullish on the stock, dishing out 6.78 percent of its 13F equity portfolio to CTLT.

As industrywide interest jumped, some big names were breaking ground themselves. Iron Triangle Partners, managed by Kevin Molloy, created the most outsized position in Catalent Inc (NYSE:CTLT). Iron Triangle Partners had $65.8 million invested in the company at the end of the quarter. Richard SchimeláandáLawrence Sapanski's Cinctive Capital Management also initiated a $7.3 million position during the quarter. The other funds with brand new CTLT positions are Michael Rockefeller and KarláKroeker's Woodline Partners, Paul Tudor Jones's Tudor Investment Corp, and Greg Poole's Echo Street Capital Management.

Let's now review hedge fund activity in other stocks similar to Catalent Inc (NYSE:CTLT). These stocks are Pool Corporation (NASDAQ:POOL), PagSeguro Digital Ltd. (NYSE:PAGS), Genuine Parts Company (NYSE:GPC), NetApp Inc. (NASDAQ:NTAP), Domino's Pizza, Inc. (NYSE:DPZ), NVR, Inc. (NYSE:NVR), and Healthpeak Properties, Inc. (NYSE:PEAK). This group of stocks' market values match CTLT's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position POOL,40,1025705,-1 PAGS,40,2390344,7 GPC,29,418026,3 NTAP,31,437722,5 DPZ,31,2494688,2 NVR,28,1093288,-11 PEAK,22,119796,4 Average,31.6,1139938,1.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.6 hedge funds with bullish positions and the average amount invested in these stocks was $1140 million. That figure was $871 million in CTLT's case. Pool Corporation (NASDAQ:POOL) is the most popular stock in this table. On the other hand Healthpeak Properties, Inc. (NYSE:PEAK) is the least popular one with only 22 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 90. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 21.8% in 2021 through October 11th and still beat the market by 4.4 percentage points. Hedge funds were also right about betting on CTLT as the stock returned 18.9% since the end of Q2 (through 10/11) 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.