It was a rough fourth quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. This was the case with hedge funds, who we heard were pulling money from the market amid the volatility, which included money from small-cap stocks, which they invest in at a higher rate than other investors. This action contributed to the greater decline in these stocks during the tumultuous period. We will study how this market volatility affected their sentiment towards Ingles Markets, Incorporated (NASDAQ:IMKTA) during the quarter below.
Ingles Markets, Incorporated (NASDAQ:IMKTA) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 10 hedge funds' portfolios at the end of December. At the end of this article we will also compare IMKTA to other stocks including Sapiens International Corporation N.V. (NASDAQ:SPNS), ObsEva SA (NASDAQ:OBSV), and Modine Manufacturing Company (NYSE:MOD) to get a better sense of its popularity.
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 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We're going to take a peek at the recent hedge fund action surrounding Ingles Markets, Incorporated (NASDAQ:IMKTA).
Hedge fund activity in Ingles Markets, Incorporated (NASDAQ:IMKTA)
Heading into the first quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 8 hedge funds with a bullish position in IMKTA a year ago. With hedge funds' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
More specifically, GAMCO Investors was the largest shareholder of Ingles Markets, Incorporated (NASDAQ:IMKTA), with a stake worth $29.4 million reported as of the end of December. Trailing GAMCO Investors was Arrowstreet Capital, which amassed a stake valued at $3.7 million. AQR Capital Management, Citadel Investment Group, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
Judging by the fact that Ingles Markets, Incorporated (NASDAQ:IMKTA) has experienced a decline in interest from hedge fund managers, it's safe to say that there was a specific group of hedgies that slashed their positions entirely in the third quarter. It's worth mentioning that Matthew Hulsizer's PEAK6 Capital Management said goodbye to the largest stake of the 700 funds monitored by Insider Monkey, worth close to $0.4 million in call options, and Ken Griffin's Citadel Investment Group 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 stayed the same (this is a bearish signal in our experience).
Let's now take a look at hedge fund activity in other stocks similar to Ingles Markets, Incorporated (NASDAQ:IMKTA). We will take a look at Sapiens International Corporation N.V. (NASDAQ:SPNS), ObsEva SA (NASDAQ:OBSV), Modine Manufacturing Company (NYSE:MOD), and Viking Therapeutics, Inc. (NASDAQ:VKTX). 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 SPNS,3,5284,0 OBSV,11,79499,-2 MOD,17,59798,-1 VKTX,20,56464,-7 Average,12.75,50261,-2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $50 million. That figure was $44 million in IMKTA's case. Viking Therapeutics, Inc. (NASDAQ:VKTX) is the most popular stock in this table. On the other hand Sapiens International Corporation N.V. (NASDAQ:SPNS) is the least popular one with only 3 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. 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately IMKTA wasn't nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); IMKTA investors were disappointed as the stock returned 2.9% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.