"Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn't by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today's darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn't attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal," said Vilas Fund in its Q1 investor letter. We aren't sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That's why we believe it would be worthwhile to take a look at the hedge fund sentiment on IntriCon Corporation (NASDAQ:IIN) in order to identify whether reputable and successful top money managers continue to believe in its potential.
IntriCon Corporation (NASDAQ:IIN) investors should be aware of an increase in enthusiasm from smart money of late. IIN was in 9 hedge funds' portfolios at the end of the third quarter of 2019. There were 7 hedge funds in our database with IIN holdings at the end of the previous quarter. Our calculations also showed that IIN 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.
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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_193003" align="alignnone" width="600"] Chuck Royce of Royce & 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. We're going to view the key hedge fund action surrounding IntriCon Corporation (NASDAQ:IIN).
Hedge fund activity in IntriCon Corporation (NASDAQ:IIN)
Heading into the fourth quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of 29% from the previous quarter. By comparison, 18 hedge funds held shares or bullish call options in IIN a year ago. With hedge funds' sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
The largest stake in IntriCon Corporation (NASDAQ:IIN) was held by Royce & Associates, which reported holding $7.5 million worth of stock at the end of September. It was followed by GAMCO Investors with a $6.8 million position. Other investors bullish on the company included Citadel Investment Group, Winton Capital Management, and Marshall Wace. In terms of the portfolio weights assigned to each position Endurant Capital Management allocated the biggest weight to IntriCon Corporation (NASDAQ:IIN), around 0.43% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, earmarking 0.07 percent of its 13F equity portfolio to IIN.
Consequently, key hedge funds have jumped into IntriCon Corporation (NASDAQ:IIN) headfirst. Royce & Associates, managed by Chuck Royce, assembled the most valuable position in IntriCon Corporation (NASDAQ:IIN). Royce & Associates had $7.5 million invested in the company at the end of the quarter. David Harding's Winton Capital Management also made a $1.8 million investment in the stock during the quarter. The other funds with brand new IIN positions are Renaissance Technologies, Michael Gelband's ExodusPoint Capital, and Matthew Hulsizer's PEAK6 Capital Management.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as IntriCon Corporation (NASDAQ:IIN) but similarly valued. These stocks are Auburn National Bancorporation, Inc. (NASDAQ:AUBN), Gencor Industries, Inc. (DE) (NASDAQ:GENC), Natural Gas Services Group, Inc. (NYSE:NGS), and Turtle Beach Corp (NASDAQ:HEAR). This group of stocks' market valuations are closest to IIN's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AUBN,2,708,-1 GENC,4,23922,1 NGS,10,16323,3 HEAR,10,15152,-3 Average,6.5,14026,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $23 million in IIN's case. Natural Gas Services Group, Inc. (NYSE:NGS) is the most popular stock in this table. On the other hand Auburn National Bancorporation, Inc. (NASDAQ:AUBN) is the least popular one with only 2 bullish hedge fund positions. IntriCon Corporation (NASDAQ:IIN) 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 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. Unfortunately IIN wasn't nearly as popular as these 20 stocks and hedge funds that were betting on IIN were disappointed as the stock returned -3.2% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 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.