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After several tireless days we have finished crunching the numbers from nearly 817 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of September 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Ingles Markets, Incorporated (NASDAQ:IMKTA).
Is IMKTA a good stock to buy now? Ingles Markets, Incorporated (NASDAQ:IMKTA) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 16 hedge funds' portfolios at the end of the third quarter of 2020. 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 for a quick look at the top 5 stocks). At the end of this article we will also compare IMKTA to other stocks including Bright Scholar Education Holdings Limited (NYSE:BEDU), The Gorman-Rupp Company (NYSE:GRC), and Magnite Inc. (NASDAQ:MGNI) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Matthew Hulsizer of PEAK6 Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Keeping this in mind let's analyze the recent hedge fund action surrounding Ingles Markets, Incorporated (NASDAQ:IMKTA).
Do Hedge Funds Think IMKTA Is A Good Stock To Buy Now?
At Q3's end, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 13 hedge funds held shares or bullish call options in IMKTA a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, GAMCO Investors held the most valuable stake in Ingles Markets, Incorporated (NASDAQ:IMKTA), which was worth $38.4 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $10.3 million worth of shares. Arrowstreet Capital, AQR Capital Management, and Millennium Management 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 Zebra Capital Management allocated the biggest weight to Ingles Markets, Incorporated (NASDAQ:IMKTA), around 0.77% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, earmarking 0.43 percent of its 13F equity portfolio to IMKTA.
Due to the fact that Ingles Markets, Incorporated (NASDAQ:IMKTA) has experienced falling interest from the smart money, we can see that there exists a select few money managers that slashed their positions entirely in the third quarter. Intriguingly, Lee Ainslie's Maverick Capital dumped the biggest position of all the hedgies watched by Insider Monkey, comprising an estimated $0.7 million in stock. Michael Gelband's fund, ExodusPoint Capital, also sold off its stock, about $0.3 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's go over hedge fund activity in other stocks similar to Ingles Markets, Incorporated (NASDAQ:IMKTA). We will take a look at Bright Scholar Education Holdings Limited (NYSE:BEDU), The Gorman-Rupp Company (NYSE:GRC), Magnite Inc. (NASDAQ:MGNI), Oric Pharmaceuticals, Inc. (NASDAQ:ORIC), GrowGeneration Corp. (NASDAQ:GRWG), Cincinnati Bell Inc. (NYSE:CBB), and First Commonwealth Financial (NYSE:FCF). This group of stocks' market values resemble IMKTA's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BEDU,7,72807,0 GRC,10,37246,0 MGNI,25,143850,1 ORIC,10,173916,-1 GRWG,10,56404,-1 CBB,16,134906,1 FCF,18,27940,3 Average,13.7,92438,0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.7 hedge funds with bullish positions and the average amount invested in these stocks was $92 million. That figure was $71 million in IMKTA's case. Magnite Inc. (NASDAQ:MGNI) is the most popular stock in this table. On the other hand Bright Scholar Education Holdings Limited (NYSE:BEDU) is the least popular one with only 7 bullish hedge fund positions. Ingles Markets, Incorporated (NASDAQ:IMKTA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for IMKTA is 60. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on IMKTA, though not to the same extent, as the stock returned 9.6% since Q3 (through December 14th) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.