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Grupo Financiero Galicia S.A. (GGAL): Are Hedge Funds Right About This Stock?

“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That’s why we believe it would be worthwhile to take a look at the hedge fund sentiment on Grupo Financiero Galicia S.A. (NASDAQ:GGAL) in order to identify whether reputable and successful top money managers continue to believe in its potential.

Grupo Financiero Galicia S.A. (NASDAQ:GGAL) was in 8 hedge funds’ portfolios at the end of September. GGAL investors should pay attention to a decrease in hedge fund interest lately. There were 12 hedge funds in our database with GGAL positions at the end of the previous quarter. Our calculations also showed that GGAL isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Crispin Odey of Odey Asset Management Group

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy  based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. Let’s analyze the fresh hedge fund action encompassing Grupo Financiero Galicia S.A. (NASDAQ:GGAL).

What have hedge funds been doing with Grupo Financiero Galicia S.A. (NASDAQ:GGAL)?

At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GGAL over the last 17 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Arrowstreet Capital held the most valuable stake in Grupo Financiero Galicia S.A. (NASDAQ:GGAL), which was worth $8.8 million at the end of the third quarter. On the second spot was Odey Asset Management Group which amassed $8.5 million worth of shares. Marathon Asset Management, PEAK6 Capital Management, and Marshall Wace 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 Marathon Asset Management allocated the biggest weight to Grupo Financiero Galicia S.A. (NASDAQ:GGAL), around 1.75% of its 13F portfolio. Odey Asset Management Group is also relatively very bullish on the stock, setting aside 0.95 percent of its 13F equity portfolio to GGAL.

Due to the fact that Grupo Financiero Galicia S.A. (NASDAQ:GGAL) has experienced a decline in interest from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of hedgies who were dropping their full holdings in the third quarter. It’s worth mentioning that Edmond M. Safra’s EMS Capital cut the largest stake of the “upper crust” of funds watched by Insider Monkey, valued at close to $37.2 million in stock, and Robert Pohly’s Samlyn Capital was right behind this move, as the fund dropped about $22.2 million worth. These moves are interesting, as total hedge fund interest dropped by 4 funds in the third quarter.

Let’s also examine hedge fund activity in other stocks similar to Grupo Financiero Galicia S.A. (NASDAQ:GGAL). These stocks are Pacific Premier Bancorp, Inc. (NASDAQ:PPBI), Terex Corporation (NYSE:TEX), OSI Systems, Inc. (NASDAQ:OSIS), and Knowles Corporation (NYSE:KN). All of these stocks’ market caps are closest to GGAL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PPBI 8 45631 0
TEX 18 258694 3
OSIS 22 179941 9
KN 26 264352 4
Average 18.5 187155 4

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $187 million. That figure was $26 million in GGAL’s case. Knowles Corporation (NYSE:KN) is the most popular stock in this table. On the other hand Pacific Premier Bancorp, Inc. (NASDAQ:PPBI) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Grupo Financiero Galicia S.A. (NASDAQ:GGAL) is even less popular than PPBI. Hedge funds dodged a bullet by taking a bearish stance towards GGAL. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately GGAL wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); GGAL investors were disappointed as the stock returned 2.8% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.

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

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