"October lived up to its scary reputation—the S&P 500 falling in the month by the largest amount in the last 40 years, the only worse Octobers being '08 and the Crash of '87. For perspective, there have been only 5 occasions in those 40 years when the S&P 500 declined by greater than 20% from peak to trough. Other than the '87 Crash, all were during recessions. There were 17 other instances, over the same time frame, when the market fell by over 10% but less than 20%. Furthermore, this is the 18th correction of 5% or more since the current bull market started in March '09. Corrections are the norm. They can be healthy as they often undo market complacency—overbought levels—potentially allowing the market to base and move even higher." This is how Trapeze Asset Management summarized the recent market moves in its investor letter. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards one of the stocks hedge funds invest in.

MGP Ingredients Inc (NASDAQ:MGPI) has seen an increase in hedge fund interest recently. MGPI was in 11 hedge funds' portfolios at the end of the third quarter of 2018. There were 8 hedge funds in our database with MGPI holdings at the end of the previous quarter. Our calculations also showed that mgpi isn't among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? 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 market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Let's check out the new hedge fund action surrounding MGP Ingredients Inc (NASDAQ:MGPI).

Hedge fund activity in MGP Ingredients Inc (NASDAQ:MGPI)

At Q3's end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 38% from one quarter earlier. By comparison, 10 hedge funds held shares or bullish call options in MGPI heading into this year. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.