How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Chart Industries, Inc. (NASDAQ:GTLS) and determine whether hedge funds had an edge regarding this stock.
Is Chart Industries, Inc. (NASDAQ:GTLS) the right pick for your portfolio? Money managers were becoming more confident. The number of bullish hedge fund bets inched up by 1 in recent months. Chart Industries, Inc. (NASDAQ:GTLS) was in 22 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 24. Our calculations also showed that GTLS isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this lithium company which could also benefit from the electric car adoption. 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. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Now we’re going to review the recent hedge fund action surrounding Chart Industries, Inc. (NASDAQ:GTLS).
How have hedgies been trading Chart Industries, Inc. (NASDAQ:GTLS)?
At the end of the second quarter, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from the first quarter of 2020. On the other hand, there were a total of 24 hedge funds with a bullish position in GTLS a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Ken Fisher’s Fisher Asset Management has the biggest position in Chart Industries, Inc. (NASDAQ:GTLS), worth close to $51.9 million, comprising 0.1% of its total 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, managed by Ken Griffin, which holds a $34.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism consist of Matt Smith’s Deep Basin Capital, Richard Driehaus’s Driehaus Capital and Todd J. Kantor’s Encompass Capital Advisors. In terms of the portfolio weights assigned to each position Deep Basin Capital allocated the biggest weight to Chart Industries, Inc. (NASDAQ:GTLS), around 4.37% of its 13F portfolio. SIR Capital Management is also relatively very bullish on the stock, dishing out 2.52 percent of its 13F equity portfolio to GTLS.
With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. Point72 Asset Management, managed by Steve Cohen, created the largest position in Chart Industries, Inc. (NASDAQ:GTLS). Point72 Asset Management had $2.7 million invested in the company at the end of the quarter. Peter Muller’s PDT Partners also initiated a $0.6 million position during the quarter. The following funds were also among the new GTLS investors: Ran Pang’s Quantamental Technologies, Donald Sussman’s Paloma Partners, and Michael Gelband’s ExodusPoint Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Chart Industries, Inc. (NASDAQ:GTLS) but similarly valued. We will take a look at Independent Bank Group Inc (NASDAQ:IBTX), InterDigital, Inc. (NASDAQ:IDCC), Easterly Government Properties Inc (NYSE:DEA), Progress Software Corporation (NASDAQ:PRGS), FS KKR Capital Corp. (NYSE:FSK), I-Mab (NASDAQ:IMAB), and Zentalis Pharmaceuticals, Inc. (NASDAQ:ZNTL). This group of stocks’ market values are closest to GTLS’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.1 hedge funds with bullish positions and the average amount invested in these stocks was $247 million. That figure was $195 million in GTLS’s case. Progress Software Corporation (NASDAQ:PRGS) is the most popular stock in this table. On the other hand I-Mab (NASDAQ:IMAB) is the least popular one with only 3 bullish hedge fund positions. Chart Industries, Inc. (NASDAQ:GTLS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GTLS is 73.1. 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 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 24.8% in 2020 through the end of third quarter and still beat the market by 19.3 percentage points. Hedge funds were also right about betting on GTLS as the stock returned 44.9% during Q3 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.