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Did Hedge Funds Make The Right Call On Genuine Parts Company (GPC) ?

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 Genuine Parts Company (NYSE:GPC) and determine whether the smart money was really smart about this stock.

Genuine Parts Company (NYSE:GPC) investors should pay attention to an increase in hedge fund sentiment lately. GPC was in 22 hedge funds’ portfolios at the end of March. There were 21 hedge funds in our database with GPC positions at the end of the previous quarter. Our calculations also showed that GPC 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Mario Gabelli of GAMCO Investors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. 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. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. Now let’s take a gander at the fresh hedge fund action regarding Genuine Parts Company (NYSE:GPC).

What have hedge funds been doing with Genuine Parts Company (NYSE:GPC)?

At the end of the first quarter, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from the previous quarter. The graph below displays the number of hedge funds with bullish position in GPC over the last 18 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

More specifically, GAMCO Investors was the largest shareholder of Genuine Parts Company (NYSE:GPC), with a stake worth $75 million reported as of the end of September. Trailing GAMCO Investors was Holocene Advisors, which amassed a stake valued at $19 million. Balyasny Asset Management, Gotham Asset Management, and Citadel Investment Group 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 GAMCO Investors allocated the biggest weight to Genuine Parts Company (NYSE:GPC), around 0.89% of its 13F portfolio. Gotham Asset Management is also relatively very bullish on the stock, designating 0.31 percent of its 13F equity portfolio to GPC.

As industrywide interest jumped, key hedge funds were leading the bulls’ herd. Balyasny Asset Management, managed by Dmitry Balyasny, established the biggest position in Genuine Parts Company (NYSE:GPC). Balyasny Asset Management had $18.6 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $4.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, David Costen Haley’s HBK Investments, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Genuine Parts Company (NYSE:GPC) but similarly valued. We will take a look at Hasbro, Inc. (NASDAQ:HAS), J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT), Live Nation Entertainment, Inc. (NYSE:LYV), and Korea Electric Power Corporation (NYSE:KEP). This group of stocks’ market valuations are similar to GPC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HAS 25 451618 -11
JBHT 25 225951 -3
LYV 46 1626857 2
KEP 7 30022 4
Average 25.75 583612 -2

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.75 hedge funds with bullish positions and the average amount invested in these stocks was $584 million. That figure was $164 million in GPC’s case. Live Nation Entertainment, Inc. (NYSE:LYV) is the most popular stock in this table. On the other hand Korea Electric Power Corporation (NYSE:KEP) is the least popular one with only 7 bullish hedge fund positions. Genuine Parts Company (NYSE:GPC) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on GPC as the stock returned 30.3% during the second quarter and outperformed the market by an even larger margin.

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