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At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Integer Holdings Corporation (NYSE:ITGR).
Hedge fund interest in Integer Holdings Corporation (NYSE:ITGR) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare ITGR to other stocks including Apple Hospitality REIT Inc (NYSE:APLE), Proto Labs Inc (NYSE:PRLB), and Advanced Drainage Systems Inc. (NYSE:WMS) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 58 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.
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Ric Dillon of Diamond Hill Capital[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to go over the key hedge fund action encompassing Integer Holdings Corporation (NYSE:ITGR).
What does smart money think about Integer Holdings Corporation (NYSE:ITGR)?
At the end of the first quarter, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. By comparison, 29 hedge funds held shares or bullish call options in ITGR a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
Among these funds, Fisher Asset Management held the most valuable stake in Integer Holdings Corporation (NYSE:ITGR), which was worth $47.7 million at the end of the third quarter. On the second spot was GLG Partners which amassed $15.8 million worth of shares. AQR Capital Management, Citadel Investment Group, and Diamond Hill Capital 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 Tamarack Capital Management allocated the biggest weight to Integer Holdings Corporation (NYSE:ITGR), around 0.24% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, dishing out 0.14 percent of its 13F equity portfolio to ITGR.
Since Integer Holdings Corporation (NYSE:ITGR) has witnessed a decline in interest from the smart money, logic holds that there is a sect of hedgies that slashed their positions entirely last quarter. Interestingly, Paul Marshall and Ian Wace's Marshall Wace LLP dumped the largest investment of the "upper crust" of funds followed by Insider Monkey, worth an estimated $15.6 million in stock. Dmitry Balyasny's fund, Balyasny Asset Management, also said goodbye to its stock, about $8.4 million worth. These transactions are interesting, 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 Integer Holdings Corporation (NYSE:ITGR). We will take a look at Apple Hospitality REIT Inc (NYSE:APLE), Proto Labs Inc (NYSE:PRLB), Advanced Drainage Systems Inc. (NYSE:WMS), and Washington Federal Inc. (NASDAQ:WAFD). This group of stocks' market values match ITGR's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position APLE,11,74704,-4 PRLB,13,21459,3 WMS,25,368899,0 WAFD,18,42649,-1 Average,16.75,126928,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $127 million. That figure was $89 million in ITGR's case. Advanced Drainage Systems Inc. (NYSE:WMS) is the most popular stock in this table. On the other hand Apple Hospitality REIT Inc (NYSE:APLE) is the least popular one with only 11 bullish hedge fund positions. Integer Holdings Corporation (NYSE:ITGR) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 12.2% in 2020 through June 17th but beat the market by 14.8 percentage points. Unfortunately ITGR wasn't nearly as popular as these 10 stocks and hedge funds that were betting on ITGR were disappointed as the stock returned 20.1% during the same time period 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.