Amid an overall market correction, many stocks that smart money investors were collectively bullish on tanked during the fourth quarter. Among them, Amazon and Netflix ranked among the top 30 picks and both lost more than 25%. Facebook, which was the second most popular stock, lost 20% amid uncertainty regarding the interest rates and tech valuations. Nevertheless, our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That's why we weren't surprised when hedge funds’ top 15 large-cap stock picks generated a return of 19.7% during the first 2.5 months of 2019 and outperformed the broader market benchmark by 6.6 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Ingredion Inc (NYSE:INGR) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 21 hedge funds' portfolios at the end of December. At the end of this article we will also compare INGR to other stocks including Bausch Health Companies (NYSE:BHC), AMERCO (NASDAQ:UHAL), and Unum Group (NYSE:UNM) to get a better sense of its popularity.
In the financial world there are tons of tools shareholders have at their disposal to evaluate their stock investments. A pair of the most innovative tools are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the elite investment managers can trounce the market by a superb margin (see the details here).
Let's take a peek at the recent hedge fund action encompassing Ingredion Inc (NYSE:INGR).
How are hedge funds trading Ingredion Inc (NYSE:INGR)?
At Q4's end, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2018. By comparison, 20 hedge funds held shares or bullish call options in INGR a year ago. With hedge funds' sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
The largest stake in Ingredion Inc (NYSE:INGR) was held by AQR Capital Management, which reported holding $96 million worth of stock at the end of September. It was followed by Fisher Asset Management with a $62.3 million position. Other investors bullish on the company included Renaissance Technologies, Winton Capital Management, and Gotham Asset Management.
Judging by the fact that Ingredion Inc (NYSE:INGR) has faced declining sentiment from hedge fund managers, it's safe to say that there is a sect of funds that elected to cut their full holdings last quarter. At the top of the heap, Ian Simm's Impax Asset Management sold off the largest investment of the 700 funds tracked by Insider Monkey, totaling an estimated $2.6 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital was right behind this move, as the fund sold off about $2.1 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's also examine hedge fund activity in other stocks similar to Ingredion Inc (NYSE:INGR). We will take a look at Bausch Health Companies (NYSE:BHC), AMERCO (NASDAQ:UHAL), Unum Group (NYSE:UNM), and KAR Auction Services Inc (NYSE:KAR). This group of stocks' market caps resemble INGR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BHC,32,1348483,2 UHAL,7,348384,-1 UNM,25,291468,0 KAR,34,573718,6 Average,24.5,640513,1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $641 million. That figure was $236 million in INGR's case. KAR Auction Services Inc (NYSE:KAR) is the most popular stock in this table. On the other hand AMERCO (NASDAQ:UHAL) is the least popular one with only 7 bullish hedge fund positions. Ingredion Inc (NYSE:INGR) 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 21.3% through April 8th and outperformed the S&P 500 ETF (SPY) by more than 5 percentage points. Unfortunately INGR wasn't in this group. Hedge funds that bet on INGR were disappointed as the stock returned 4.1% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 12 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.