The first quarter was a breeze as Powell pivoted, and China seemed eager to reach a deal with Trump. Both the S&P 500 and Russell 2000 delivered very strong gains as a result, with the Russell 2000, which is composed of smaller companies, outperforming the large-cap stocks slightly during the first quarter. Unfortunately sentiment shifted in May and August as this time China pivoted and Trump put more pressure on China by increasing tariffs. Fourth quarter brought optimism to the markets and hedge funds' top 20 stock picks performed spectacularly in this volatile environment. These stocks delivered a total gain of 37.4% through the end of November, vs. a gain of 27.5% for the S&P 500 ETF. In this article we will look at how this market volatility affected the sentiment of hedge funds towards Ingles Markets, Incorporated (NASDAQ:IMKTA), and what that likely means for the prospects of the company and its stock.
Ingles Markets, Incorporated (NASDAQ:IMKTA) was in 12 hedge funds' portfolios at the end of September. IMKTA has seen a decrease in enthusiasm from smart money recently. There were 13 hedge funds in our database with IMKTA holdings at the end of the previous quarter. Our calculations also showed that IMKTA 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.
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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_30600" align="aligncenter" width="520"] Bruce Kovner of Caxton Associates[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. Let's take a glance at the new hedge fund action surrounding Ingles Markets, Incorporated (NASDAQ:IMKTA).
What have hedge funds been doing with Ingles Markets, Incorporated (NASDAQ:IMKTA)?
Heading into the fourth quarter of 2019, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the previous quarter. On the other hand, there were a total of 10 hedge funds with a bullish position in IMKTA a year ago. With hedge funds' sentiment swirling, there exists a few key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
The largest stake in Ingles Markets, Incorporated (NASDAQ:IMKTA) was held by GAMCO Investors, which reported holding $39.8 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $6.1 million position. Other investors bullish on the company included AQR Capital Management, Citadel Investment Group, and D E Shaw. In terms of the portfolio weights assigned to each position Zebra Capital Management allocated the biggest weight to Ingles Markets, Incorporated (NASDAQ:IMKTA), around 0.5% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, setting aside 0.33 percent of its 13F equity portfolio to IMKTA.
Due to the fact that Ingles Markets, Incorporated (NASDAQ:IMKTA) has experienced declining sentiment from hedge fund managers, it's easy to see that there exists a select few fund managers that elected to cut their entire stakes in the third quarter. Intriguingly, Mark Travis's Intrepid Capital Management said goodbye to the biggest investment of the 750 funds tracked by Insider Monkey, worth an estimated $1.2 million in stock, and David Harding's Winton Capital Management was right behind this move, as the fund cut about $0.3 million worth. These transactions are important to note, as total hedge fund interest dropped by 1 funds in the third quarter.
Let's check out hedge fund activity in other stocks similar to Ingles Markets, Incorporated (NASDAQ:IMKTA). These stocks are Celestica Inc. (NYSE:CLS), ConnectOne Bancorp Inc (NASDAQ:CNOB), Despegar.com, Corp. (NYSE:DESP), and Camping World Holdings, Inc. (NYSE:CWH). This group of stocks' market valuations are similar to IMKTA's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CLS,13,69373,1 CNOB,12,48484,3 DESP,11,150886,-1 CWH,12,95452,3 Average,12,91049,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $91 million. That figure was $60 million in IMKTA's case. Celestica Inc. (NYSE:CLS) is the most popular stock in this table. On the other hand Despegar.com, Corp. (NYSE:DESP) is the least popular one with only 11 bullish hedge fund positions. Ingles Markets, Incorporated (NASDAQ:IMKTA) 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 IMKTA as the stock returned 14.8% 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.