Garmin Ltd. (GRMN) Fell Out Of Favor With Hedge Funds

At Insider Monkey, we pore over the filings of nearly 866 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of March 31st. In this article, we will use that wealth of knowledge to determine whether or not Garmin Ltd. (NASDAQ:GRMN) makes for a good investment right now.

Is Garmin Ltd. (NASDAQ:GRMN) a buy right now? The smart money was reducing their bets on the stock. The number of long hedge fund bets shrunk by 4 lately. Garmin Ltd. (NASDAQ:GRMN) was in 23 hedge funds’ portfolios at the end of March. The all time high for this statistic is 32. Our calculations also showed that GRMN isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 27 hedge funds in our database with GRMN holdings at the end of December.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Cathie Wood ARK Investment Management

Cathie Wood of ARK Investment Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to analyze the key hedge fund action surrounding Garmin Ltd. (NASDAQ:GRMN).

Do Hedge Funds Think GRMN Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -15% from one quarter earlier. By comparison, 27 hedge funds held shares or bullish call options in GRMN a year ago. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

The largest stake in Garmin Ltd. (NASDAQ:GRMN) was held by AQR Capital Management, which reported holding $181.3 million worth of stock at the end of December. It was followed by Select Equity Group with a $85.2 million position. Other investors bullish on the company included D E Shaw, Marshall Wace LLP, and PEAK6 Capital Management. In terms of the portfolio weights assigned to each position Socorro Asset Management allocated the biggest weight to Garmin Ltd. (NASDAQ:GRMN), around 2.21% of its 13F portfolio. Potrero Capital Research is also relatively very bullish on the stock, dishing out 1.76 percent of its 13F equity portfolio to GRMN.

Since Garmin Ltd. (NASDAQ:GRMN) has faced declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there exists a select few hedge funds that slashed their full holdings last quarter. It’s worth mentioning that Ray Dalio’s Bridgewater Associates dumped the biggest stake of the “upper crust” of funds monitored by Insider Monkey, totaling about $3 million in stock, and David Harding’s Winton Capital Management was right behind this move, as the fund dropped about $2.4 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 4 funds last quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Garmin Ltd. (NASDAQ:GRMN) but similarly valued. We will take a look at Sirius XM Holdings Inc (NASDAQ:SIRI), Seagen Inc. (NASDAQ:SGEN), Telefonica S.A. (NYSE:TEF), Yum China Holdings, Inc. (NYSE:YUMC), Laboratory Corp. of America Holdings (NYSE:LH), Occidental Petroleum Corporation (NYSE:OXY), and Deutsche Bank Aktiengesellschaft (NYSE:DB). All of these stocks’ market caps resemble GRMN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SIRI 24 570460 -8
SGEN 39 7467410 7
TEF 6 4834 1
YUMC 34 975839 -5
LH 54 2476443 -12
OXY 52 3418445 3
DB 16 1773587 0
Average 32.1 2383860 -2

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.1 hedge funds with bullish positions and the average amount invested in these stocks was $2384 million. That figure was $513 million in GRMN’s case. Laboratory Corp. of America Holdings (NYSE:LH) is the most popular stock in this table. On the other hand Telefonica S.A. (NYSE:TEF) is the least popular one with only 6 bullish hedge fund positions. Garmin Ltd. (NASDAQ:GRMN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for GRMN is 40.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and beat the market by 7.7 percentage points. A small number of hedge funds were also right about betting on GRMN, though not to the same extent, as the stock returned 13.8% since the end of Q1 (through July 16th) and outperformed the market.

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