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Hedge Funds Are Dumping Gentherm Inc (THRM)

With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter. One of these stocks was Gentherm Inc (NASDAQ:THRM).

Is Gentherm Inc (NASDAQ:THRM) ready to rally soon? Investors who are in the know are getting less bullish. The number of long hedge fund bets dropped by 4 lately. Our calculations also showed that THRM 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.

THRM_oct2019

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 go over the key hedge fund action regarding Gentherm Inc (NASDAQ:THRM).

How have hedgies been trading Gentherm Inc (NASDAQ:THRM)?

At Q2’s end, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of -21% from the first quarter of 2019. On the other hand, there were a total of 14 hedge funds with a bullish position in THRM a year ago. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

TUDOR INVESTMENT CORP

Of the funds tracked by Insider Monkey, Douglas T. Granat’s Trigran Investments has the largest position in Gentherm Inc (NASDAQ:THRM), worth close to $48.2 million, corresponding to 8% of its total 13F portfolio. Sitting at the No. 2 spot is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $5.7 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that are bullish include Paul Tudor Jones’s Tudor Investment Corp, Renaissance Technologies and Alec Litowitz and Ross Laser’s Magnetar Capital.

Since Gentherm Inc (NASDAQ:THRM) has experienced bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there exists a select few funds that decided to sell off their full holdings last quarter. At the top of the heap, Eli Cohen’s Crescent Park Management sold off the biggest position of the “upper crust” of funds followed by Insider Monkey, valued at an estimated $7.7 million in stock, and Richard McGuire’s Marcato Capital Management was right behind this move, as the fund cut about $6.7 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 4 funds last quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Gentherm Inc (NASDAQ:THRM) but similarly valued. These stocks are National Research Corporation (NASDAQ:NRC), Silk Road Medical, Inc. (NASDAQ:SILK), Constellium SE (NYSE:CSTM), and Frontline Ltd (NYSE:FRO). All of these stocks’ market caps are closest to THRM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NRC 9 50775 2
SILK 11 66260 11
CSTM 37 341497 -4
FRO 13 76629 3
Average 17.5 133790 3

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $134 million. That figure was $63 million in THRM’s case. Constellium SE (NYSE:CSTM) is the most popular stock in this table. On the other hand National Research Corporation (NASDAQ:NRC) is the least popular one with only 9 bullish hedge fund positions. Gentherm Inc (NASDAQ:THRM) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 THRM wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); THRM investors were disappointed as the stock returned -1.8% 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 so far in 2019.

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

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