GCP Applied Technologies Inc. (GCP): Hedge Funds Cashing Out

We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like GCP Applied Technologies Inc. (NYSE:GCP).

Is GCP Applied Technologies Inc. (NYSE:GCP) worth your attention right now? Money managers are becoming less hopeful. The number of long hedge fund positions went down by 3 in recent months. Our calculations also showed that GCP isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Jeff Smith

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s go over the recent hedge fund action surrounding GCP Applied Technologies Inc. (NYSE:GCP).

What have hedge funds been doing with GCP Applied Technologies Inc. (NYSE:GCP)?

At Q2’s end, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -12% from the first quarter of 2019. By comparison, 20 hedge funds held shares or bullish call options in GCP 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.

No of Hedge Funds with GCP Positions

Among these funds, Starboard Value LP held the most valuable stake in GCP Applied Technologies Inc. (NYSE:GCP), which was worth $120.5 million at the end of the second quarter. On the second spot was 40 North Management which amassed $115.8 million worth of shares. Moreover, GAMCO Investors, Adage Capital Management, and Greenhouse Funds were also bullish on GCP Applied Technologies Inc. (NYSE:GCP), allocating a large percentage of their portfolios to this stock.

Because GCP Applied Technologies Inc. (NYSE:GCP) has faced declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there exists a select few fund managers who sold off their full holdings last quarter. Interestingly, Louis Bacon’s Moore Global Investments sold off the biggest investment of the 750 funds tracked by Insider Monkey, totaling about $61.7 million in stock. James Dinan’s fund, York Capital Management, also dropped its stock, about $27.3 million worth. These moves are interesting, as total hedge fund interest dropped by 3 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to GCP Applied Technologies Inc. (NYSE:GCP). These stocks are Saia Inc (NASDAQ:SAIA), Alexander & Baldwin Inc (NYSE:ALEX), WestAmerica Bancorporation (NASDAQ:WABC), and Knowles Corporation (NYSE:KN). All of these stocks’ market caps match GCP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SAIA 9 63027 -5
ALEX 10 24038 5
WABC 10 19455 4
KN 22 264759 5
Average 12.75 92820 2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $93 million. That figure was $457 million in GCP’s case. Knowles Corporation (NYSE:KN) is the most popular stock in this table. On the other hand Saia Inc (NASDAQ:SAIA) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks GCP Applied Technologies Inc. (NYSE:GCP) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately GCP wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on GCP were disappointed as the stock returned -15% during the third 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3.

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