At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Gentex Corporation (NASDAQ:GNTX) at the end of the first quarter and determine whether the smart money was really smart about this stock.
Is Gentex Corporation (NASDAQ:GNTX) going to take off soon? Hedge funds were turning bullish. The number of long hedge fund bets rose by 5 lately. Our calculations also showed that GNTX 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.
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 58 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.
Joel Greenblatt of Gotham Asset Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to check out the new hedge fund action regarding Gentex Corporation (NASDAQ:GNTX).
How are hedge funds trading Gentex Corporation (NASDAQ:GNTX)?
At the end of the first quarter, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 16% from the fourth quarter of 2019. By comparison, 23 hedge funds held shares or bullish call options in GNTX a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Gentex Corporation (NASDAQ:GNTX) was held by Adage Capital Management, which reported holding $94.1 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $93.2 million position. Other investors bullish on the company included Nitorum Capital, Citadel Investment Group, and Royce & Associates. In terms of the portfolio weights assigned to each position Nitorum Capital allocated the biggest weight to Gentex Corporation (NASDAQ:GNTX), around 5.06% of its 13F portfolio. Motley Fool Asset Management is also relatively very bullish on the stock, earmarking 0.86 percent of its 13F equity portfolio to GNTX.
Consequently, key money managers were breaking ground themselves. Cinctive Capital Management, managed by Richard SchimeláandáLawrence Sapanski, assembled the biggest position in Gentex Corporation (NASDAQ:GNTX). Cinctive Capital Management had $2.3 million invested in the company at the end of the quarter. Greg Eisner’s Engineers Gate Manager also initiated a $1.4 million position during the quarter. The other funds with brand new GNTX positions are Lee Ainslie’s Maverick Capital, Peter Muller’s PDT Partners, and Bruce Kovner’s Caxton Associates LP.
Let’s go over hedge fund activity in other stocks similar to Gentex Corporation (NASDAQ:GNTX). These stocks are UGI Corp (NYSE:UGI), Genpact Limited (NYSE:G), National Retail Properties, Inc. (NYSE:NNN), and Bruker Corporation (NASDAQ:BRKR). All of these stocks’ market caps match GNTX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UGI | 27 | 253339 | 4 |
| G | 34 | 335413 | -3 |
| NNN | 19 | 62007 | -4 |
| BRKR | 21 | 109920 | -4 |
| Average | 25.25 | 190170 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.25 hedge funds with bullish positions and the average amount invested in these stocks was $190 million. That figure was $479 million in GNTX’s case. Genpact Limited (NYSE:G) is the most popular stock in this table. On the other hand National Retail Properties, Inc. (NYSE:NNN) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Gentex Corporation (NASDAQ:GNTX) 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 gained 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. Unfortunately GNTX wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on GNTX were disappointed as the stock returned 16.9% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 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.
