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Did Hedge Funds Make The Right Call On Garrett Motion Inc. (GTX) ?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Garrett Motion Inc. (NYSE:GTX) and determine whether the smart money was really smart about this stock.

Garrett Motion Inc. (NYSE:GTX) has seen a decrease in enthusiasm from smart money in recent months. Our calculations also showed that GTX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In today’s marketplace there are a large number of tools investors employ to assess stocks. A duo of the less utilized tools are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the top picks of the top fund managers can outclass their index-focused peers by a significant amount (see the details here).

SAC CAPITAL ADVISORS

Steven Cohen of Point72 Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. We go through lists like the 10 most profitable companies in the world 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now we’re going to go over the key hedge fund action regarding Garrett Motion Inc. (NYSE:GTX).

Hedge fund activity in Garrett Motion Inc. (NYSE:GTX)

Heading into the second quarter of 2020, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of -45% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GTX over the last 18 quarters. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

Is GTX A Good Stock To Buy?

More specifically, Deccan Value Advisors was the largest shareholder of Garrett Motion Inc. (NYSE:GTX), with a stake worth $30.1 million reported as of the end of September. Trailing Deccan Value Advisors was Sessa Capital, which amassed a stake valued at $20.9 million. Newtyn Management, Kingstown Capital Management, and Hawk Ridge Management 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 Newtyn Management allocated the biggest weight to Garrett Motion Inc. (NYSE:GTX), around 3.69% of its 13F portfolio. Solas Capital Management is also relatively very bullish on the stock, dishing out 3.1 percent of its 13F equity portfolio to GTX.

Seeing as Garrett Motion Inc. (NYSE:GTX) has faced bearish sentiment from hedge fund managers, it’s easy to see that there lies a certain “tier” of funds who were dropping their entire stakes by the end of the first quarter. Intriguingly, Steven Tananbaum’s GoldenTree Asset Management dropped the largest stake of the “upper crust” of funds tracked by Insider Monkey, worth close to $12 million in stock, and Mark Travis’s Intrepid Capital Management was right behind this move, as the fund cut about $3.8 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 17 funds by the end of the first quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Garrett Motion Inc. (NYSE:GTX) but similarly valued. These stocks are Unifi, Inc. (NYSE:UFI), Aesthetic Medical International Holdings Group Ltd. (NASDAQ:AIH), Nam Tai Property Inc (NYSE:NTP), and Veru Inc. (NASDAQ:VERU). This group of stocks’ market valuations are similar to GTX’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
UFI 14 47158 0
AIH 1 525 1
NTP 6 38517 -2
VERU 8 12593 1
Average 7.25 24698 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $25 million. That figure was $82 million in GTX’s case. Unifi, Inc. (NYSE:UFI) is the most popular stock in this table. On the other hand Aesthetic Medical International Holdings Group Ltd. (NASDAQ:AIH) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Garrett Motion Inc. (NYSE:GTX) is more popular among hedge funds. 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 returned 18.6% in 2020 through July 27th but still managed to beat the market by 17.1 percentage points. Hedge funds were also right about betting on GTX as the stock returned 141.3% since Q1 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.

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