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Did Hedge Funds Drop The Ball On Quad/Graphics, Inc. (QUAD) ?

We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Quad/Graphics, Inc. (NYSE:QUAD).

Quad/Graphics, Inc. (NYSE:QUAD) has experienced a decrease in hedge fund interest in recent months. QUAD was in 16 hedge funds’ portfolios at the end of June. There were 22 hedge funds in our database with QUAD holdings at the end of the previous quarter. Our calculations also showed that QUAD isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most market participants, hedge funds are seen as worthless, old financial vehicles of yesteryear. While there are over 8000 funds in operation at the moment, Our researchers choose to focus on the bigwigs of this group, about 750 funds. Most estimates calculate that this group of people watch over most of the smart money’s total capital, and by shadowing their inimitable investments, Insider Monkey has come up with a number of investment strategies that have historically defeated Mr. Market. Insider Monkey’s flagship hedge fund strategy surpassed the S&P 500 index by around 5 percentage points annually since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .

Paul Glazer of Glazer Capital

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a gander at the new hedge fund action surrounding Quad/Graphics, Inc. (NYSE:QUAD).

What have hedge funds been doing with Quad/Graphics, Inc. (NYSE:QUAD)?

At the end of the second quarter, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -27% from the previous quarter. The graph below displays the number of hedge funds with bullish position in QUAD over the last 16 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with QUAD Positions

Among these funds, GLG Partners held the most valuable stake in Quad/Graphics, Inc. (NYSE:QUAD), which was worth $5.1 million at the end of the second quarter. On the second spot was Miller Value Partners which amassed $4.6 million worth of shares. Moreover, Glazer Capital, Renaissance Technologies, and Manikay Partners were also bullish on Quad/Graphics, Inc. (NYSE:QUAD), allocating a large percentage of their portfolios to this stock.

Since Quad/Graphics, Inc. (NYSE:QUAD) has faced bearish sentiment from hedge fund managers, we can see that there exists a select few hedgies that slashed their entire stakes last quarter. Intriguingly, Andrew Weiss’s Weiss Asset Management dropped the largest investment of all the hedgies followed by Insider Monkey, valued at about $2.7 million in stock. David Costen Haley’s fund, HBK Investments, also cut its stock, about $1.8 million worth. These transactions are important to note, as total hedge fund interest dropped by 6 funds last quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Quad/Graphics, Inc. (NYSE:QUAD) but similarly valued. We will take a look at Nam Tai Property Inc (NYSE:NTP), RBB Bancorp (NASDAQ:RBB), Majesco (NASDAQ:MJCO), and Westport Fuel Systems Inc. (NASDAQ:WPRT). All of these stocks’ market caps are similar to QUAD’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NTP 7 68438 2
RBB 5 10320 0
MJCO 3 423 0
WPRT 13 36374 1
Average 7 28889 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $29 million. That figure was $27 million in QUAD’s case. Westport Fuel Systems Inc. (NASDAQ:WPRT) is the most popular stock in this table. On the other hand Majesco (NASDAQ:MJCO) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Quad/Graphics, Inc. (NYSE:QUAD) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on QUAD as the stock returned 37.2% during Q3 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

Disclosure: None. This article was originally published at Insider Monkey.

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