In this article we will check out the progression of hedge fund sentiment towards Neogen Corporation (NASDAQ:NEOG) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Neogen Corporation (NASDAQ:NEOG) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 16 hedge funds' portfolios at the end of March. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Leggett & Platt, Inc. (NYSE:LEG), Adaptive Biotechnologies Corporation (NASDAQ:ADPT), and Alaska Air Group, Inc. (NYSE:ALK) to gather more data points. Our calculations also showed that NEOG 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.
In the financial world there are dozens of signals shareholders employ to value stocks. A couple of the most innovative signals are hedge fund and insider trading moves. We have shown that, historically, those who follow the best picks of the best hedge fund managers can beat their index-focused peers by a superb margin (see the details here).
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At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 10 free email services without phone verification to identify emerging trends that are likely to lead to 1000% gains in the coming years. 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. With all of this in mind we're going to check out the fresh hedge fund action encompassing Neogen Corporation (NASDAQ:NEOG).
Hedge fund activity in Neogen Corporation (NASDAQ:NEOG)
At Q1's end, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in NEOG over the last 18 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Israel Englander's Millennium Management has the number one position in Neogen Corporation (NASDAQ:NEOG), worth close to $12.6 million, accounting for less than 0.1%% of its total 13F portfolio. On Millennium Management's heels is D E Shaw, led by D. E. Shaw, holding a $7.4 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other members of the smart money with similar optimism encompass Robert Joseph Caruso's Select Equity Group, Ken Griffin's Citadel Investment Group and Chuck Royce's Royce & Associates. In terms of the portfolio weights assigned to each position Zebra Capital Management allocated the biggest weight to Neogen Corporation (NASDAQ:NEOG), around 0.93% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, dishing out 0.34 percent of its 13F equity portfolio to NEOG.
Due to the fact that Neogen Corporation (NASDAQ:NEOG) has experienced a decline in interest from hedge fund managers, it's safe to say that there was a specific group of fund managers who sold off their positions entirely heading into Q4. Intriguingly, Noam Gottesman's GLG Partners cut the largest investment of the "upper crust" of funds followed by Insider Monkey, comprising about $1 million in stock. Mika Toikka's fund, AlphaCrest Capital Management, also dropped its stock, about $0.8 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's check out hedge fund activity in other stocks similar to Neogen Corporation (NASDAQ:NEOG). We will take a look at Leggett & Platt, Inc. (NYSE:LEG), Adaptive Biotechnologies Corporation (NASDAQ:ADPT), Alaska Air Group, Inc. (NYSE:ALK), and Terreno Realty Corporation (NYSE:TRNO). This group of stocks' market values match NEOG's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LEG,25,70786,-2 ADPT,18,1592264,-4 ALK,27,263441,-12 TRNO,10,26182,-4 Average,20,488168,-5.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $488 million. That figure was $33 million in NEOG's case. Alaska Air Group, Inc. (NYSE:ALK) is the most popular stock in this table. On the other hand Terreno Realty Corporation (NYSE:TRNO) is the least popular one with only 10 bullish hedge fund positions. Neogen Corporation (NASDAQ:NEOG) 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 NEOG wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); NEOG investors were disappointed as the stock returned 14.4% 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.