A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Neogen Corporation (NASDAQ:NEOG).
Is NEOG a good stock to buy now? Hedge fund interest in Neogen Corporation (NASDAQ:NEOG) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that NEOG 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). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Cabot Microelectronics Corporation (NASDAQ:CCMP), Envestnet Inc (NYSE:ENV), and Futu Holdings Limited (NASDAQ:FUTU) to gather more data points. 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 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.
Paul Marshall of Marshall Wace
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. With all of this in mind we're going to take a glance at the fresh hedge fund action encompassing Neogen Corporation (NASDAQ:NEOG).
Do Hedge Funds Think NEOG Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2020. By comparison, 15 hedge funds held shares or bullish call options in NEOG a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
More specifically, GLG Partners was the largest shareholder of Neogen Corporation (NASDAQ:NEOG), with a stake worth $10.4 million reported as of the end of September. Trailing GLG Partners was D E Shaw, which amassed a stake valued at $8.6 million. Citadel Investment Group, Marshall Wace LLP, and Arrowstreet 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 AlphaCrest Capital Management allocated the biggest weight to Neogen Corporation (NASDAQ:NEOG), around 0.07% of its 13F portfolio. Tudor Investment Corp is also relatively very bullish on the stock, earmarking 0.07 percent of its 13F equity portfolio to NEOG.
Due to the fact that Neogen Corporation (NASDAQ:NEOG) has faced falling interest from the smart money, we can see that there is a sect of hedgies that slashed their entire stakes last quarter. Interestingly, Robert Joseph Caruso's Select Equity Group dumped the largest position of the "upper crust" of funds watched by Insider Monkey, comprising an estimated $15.4 million in stock. Brandon Haley's fund, Holocene Advisors, also sold off its stock, about $1 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 go over hedge fund activity in other stocks - not necessarily in the same industry as Neogen Corporation (NASDAQ:NEOG) but similarly valued. These stocks are Cabot Microelectronics Corporation (NASDAQ:CCMP), Envestnet Inc (NYSE:ENV), Futu Holdings Limited (NASDAQ:FUTU), Noble Energy, Inc. (NYSE:NBL), Pure Storage, Inc. (NYSE:PSTG), Kinsale Capital Group, Inc. (NASDAQ:KNSL), and Houlihan Lokey Inc (NYSE:HLI). This group of stocks' market values resemble NEOG's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CCMP,15,120272,-8 ENV,25,165485,6 FUTU,15,102562,7 NBL,45,753639,7 PSTG,22,223929,-7 KNSL,16,47309,2 HLI,14,116876,-10 Average,21.7,218582,-0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.7 hedge funds with bullish positions and the average amount invested in these stocks was $219 million. That figure was $43 million in NEOG's case. Noble Energy, Inc. (NYSE:NBL) is the most popular stock in this table. On the other hand Houlihan Lokey Inc (NYSE:HLI) is the least popular one with only 14 bullish hedge fund positions. Neogen Corporation (NASDAQ:NEOG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NEOG is 41.5. 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. 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 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 surpassed the market again by 15.8 percentage points. Unfortunately NEOG wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); NEOG investors were disappointed as the stock returned 1.6% since the end of September (through 12/14) 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.