Hedge Funds Are Crazy About Group 1 Automotive, Inc. (GPI)

In this article we will take a look at whether hedge funds think Group 1 Automotive, Inc. (NYSE:GPI) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Group 1 Automotive, Inc. (NYSE:GPI) shareholders have witnessed an increase in enthusiasm from smart money in recent months. Group 1 Automotive, Inc. (NYSE:GPI) was in 26 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 25. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 20 hedge funds in our database with GPI positions at the end of the fourth quarter. Our calculations also showed that GPI isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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.

Joel Greenblatt Gotham Asset Management

Joel Greenblatt of Gotham Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. 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 go over the latest hedge fund action regarding Group 1 Automotive, Inc. (NYSE:GPI).

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

At Q1’s end, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 30% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in GPI over the last 23 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Eminence Capital was the largest shareholder of Group 1 Automotive, Inc. (NYSE:GPI), with a stake worth $169.8 million reported as of the end of March. Trailing Eminence Capital was Lakewood Capital Management, which amassed a stake valued at $36.4 million. Arrowstreet Capital, Millennium Management, and Citadel Investment Group 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 Eminence Capital allocated the biggest weight to Group 1 Automotive, Inc. (NYSE:GPI), around 2.1% of its 13F portfolio. Lakewood Capital Management is also relatively very bullish on the stock, designating 1.54 percent of its 13F equity portfolio to GPI.

As one would reasonably expect, key hedge funds were leading the bulls’ herd. Lakewood Capital Management, managed by Anthony Bozza, initiated the most outsized position in Group 1 Automotive, Inc. (NYSE:GPI). Lakewood Capital Management had $36.4 million invested in the company at the end of the quarter. Sander Gerber’s Hudson Bay Capital Management also made a $2.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Joel Greenblatt’s Gotham Asset Management, Donald Sussman’s Paloma Partners, and Lee Ainslie’s Maverick Capital.

Let’s now take a look at hedge fund activity in other stocks similar to Group 1 Automotive, Inc. (NYSE:GPI). We will take a look at Kennedy-Wilson Holdings Inc (NYSE:KW), MorphoSys AG (NASDAQ:MOR), Overstock.com, Inc. (NASDAQ:OSTK), National Storage Affiliates Trust (NYSE:NSA), Dycom Industries, Inc. (NYSE:DY), California Water Service Group (NYSE:CWT), and Cornerstone OnDemand, Inc. (NASDAQ:CSOD). This group of stocks’ market caps resemble GPI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KW 16 499333 0
MOR 2 4465 -1
OSTK 31 168652 7
NSA 14 103457 -4
DY 19 277404 0
CWT 8 100631 -2
CSOD 28 652188 -6
Average 16.9 258019 -0.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.9 hedge funds with bullish positions and the average amount invested in these stocks was $258 million. That figure was $304 million in GPI’s case. Overstock.com, Inc. (NASDAQ:OSTK) is the most popular stock in this table. On the other hand MorphoSys AG (NASDAQ:MOR) is the least popular one with only 2 bullish hedge fund positions. Group 1 Automotive, Inc. (NYSE:GPI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GPI is 81.4. 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 24% in 2021 through July 9th and still beat the market by 6.7 percentage points. Hedge funds were also right about betting on GPI, though not to the same extent, as the stock returned 10.4% since Q1 (through July 9th) and outperformed the market as well.

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