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Did Hedge Funds Make The Right Call On Gibraltar Industries Inc (ROCK) ?

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 Gibraltar Industries Inc (NASDAQ:ROCK) and determine whether the smart money was really smart about this stock.

Is Gibraltar Industries Inc (NASDAQ:ROCK) a buy here? Money managers were getting less bullish. The number of bullish hedge fund positions decreased by 4 in recent months. Our calculations also showed that ROCK 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). ROCK was in 19 hedge funds’ portfolios at the end of the first quarter of 2020. There were 23 hedge funds in our database with ROCK positions at the end of the previous quarter.

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

Today there are dozens of formulas shareholders can use to evaluate their stock investments. A pair of the less known formulas are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the elite fund managers can trounce their index-focused peers by a significant margin (see the details here).

Richard Pzena - Pzena Investment Management

Richard S. Pzena of Pzena Investment 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. Keeping this in mind let’s analyze the key hedge fund action regarding Gibraltar Industries Inc (NASDAQ:ROCK).

How have hedgies been trading Gibraltar Industries Inc (NASDAQ:ROCK)?

At Q1’s end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ROCK over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

Is ROCK A Good Stock To Buy?

The largest stake in Gibraltar Industries Inc (NASDAQ:ROCK) was held by Renaissance Technologies, which reported holding $26.9 million worth of stock at the end of September. It was followed by D E Shaw with a $12.9 million position. Other investors bullish on the company included Driehaus Capital, Royce & Associates, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Diametric Capital allocated the biggest weight to Gibraltar Industries Inc (NASDAQ:ROCK), around 2.2% of its 13F portfolio. Driehaus Capital is also relatively very bullish on the stock, dishing out 0.4 percent of its 13F equity portfolio to ROCK.

Seeing as Gibraltar Industries Inc (NASDAQ:ROCK) has experienced falling interest from hedge fund managers, it’s safe to say that there lies a certain “tier” of hedge funds that decided to sell off their full holdings by the end of the first quarter. It’s worth mentioning that Richard S. Pzena’s Pzena Investment Management dumped the largest position of the 750 funds followed by Insider Monkey, worth an estimated $11 million in stock, and Michael Gelband’s ExodusPoint Capital was right behind this move, as the fund dumped about $1.2 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 4 funds by the end of the first quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Gibraltar Industries Inc (NASDAQ:ROCK) but similarly valued. We will take a look at Cimpress plc (NASDAQ:CMPR), Ryder System, Inc. (NYSE:R), Mack Cali Realty Corp (NYSE:CLI), and Meritage Homes Corp (NYSE:MTH). This group of stocks’ market caps are similar to ROCK’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CMPR 19 269535 1
R 18 157531 -5
CLI 10 73802 -5
MTH 22 155253 -7
Average 17.25 164030 -4

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $164 million. That figure was $104 million in ROCK’s case. Meritage Homes Corp (NYSE:MTH) is the most popular stock in this table. On the other hand Mack Cali Realty Corp (NYSE:CLI) is the least popular one with only 10 bullish hedge fund positions. Gibraltar Industries Inc (NASDAQ:ROCK) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 18.6% in 2020 through July 27th but beat the market by 17.1 percentage points. Unfortunately ROCK wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ROCK were disappointed as the stock returned 21% during the same time period 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 many of these stocks already outperformed the market so far this year.

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