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Hedge Funds Are Crazy About GrafTech International Ltd. (EAF)

Hedge funds run by legendary names like George Soros and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That’s why we pay special attention to hedge fund activity in these stocks.

GrafTech International Ltd. (NYSE:EAF) investors should pay attention to an increase in hedge fund sentiment of late. Our calculations also showed that EAF 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.

According to most stock holders, hedge funds are seen as worthless, outdated investment vehicles of yesteryear. While there are more than 8000 funds in operation today, Our researchers hone in on the crème de la crème of this club, about 750 funds. Most estimates calculate that this group of people watch over most of all hedge funds’ total asset base, and by keeping an eye on their top picks, Insider Monkey has uncovered various investment strategies that have historically beaten the S&P 500 index. Insider Monkey’s flagship hedge fund strategy defeated the S&P 500 index by around 5 percentage points a year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .

MOHNISH PABRAI

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. We’re going to take a peek at the key hedge fund action surrounding GrafTech International Ltd. (NYSE:EAF).

What have hedge funds been doing with GrafTech International Ltd. (NYSE:EAF)?

Heading into the third quarter of 2019, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards EAF over the last 16 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

No of Hedge Funds with EAF Positions

Among these funds, Mohnish Pabrai held the most valuable stake in GrafTech International Ltd. (NYSE:EAF), which was worth $47.4 million at the end of the second quarter. On the second spot was Anchor Bolt Capital which amassed $39.9 million worth of shares. Moreover, Goodnow Investment Group, AQR Capital Management, and Indus Capital were also bullish on GrafTech International Ltd. (NYSE:EAF), allocating a large percentage of their portfolios to this stock.

Consequently, some big names have been driving this bullishness. Mohnish Pabrai, managed by Mohnish Pabrai, created the most outsized position in GrafTech International Ltd. (NYSE:EAF). Mohnish Pabrai had $47.4 million invested in the company at the end of the quarter. Nathaniel August’s Mangrove Partners also initiated a $11.1 million position during the quarter. The following funds were also among the new EAF investors: Renaissance Technologies, Chuck Royce’s Royce & Associates, and Peter Algert and Kevin Coldiron’s Algert Coldiron Investors.

Let’s also examine hedge fund activity in other stocks similar to GrafTech International Ltd. (NYSE:EAF). We will take a look at Tegna Inc (NYSE:TGNA), Paramount Group Inc (NYSE:PGRE), Coherent, Inc. (NASDAQ:COHR), and Navient Corporation (NASDAQ:NAVI). This group of stocks’ market values resemble EAF’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TGNA 15 443926 -11
PGRE 13 256557 -3
COHR 19 188599 5
NAVI 26 490383 -5
Average 18.25 344866 -3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $345 million. That figure was $247 million in EAF’s case. Navient Corporation (NASDAQ:NAVI) is the most popular stock in this table. On the other hand Paramount Group Inc (NYSE:PGRE) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks GrafTech International Ltd. (NYSE:EAF) 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. Hedge funds were also right about betting on EAF as the stock returned 12.1% during Q3 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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