Hedge Funds Are Selling GNC Holdings Inc (GNC) Again

There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other elite funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze GNC Holdings Inc (NYSE:GNC).

GNC Holdings Inc (NYSE:GNC) shareholders have witnessed a decrease in activity from the world’s largest hedge funds of late, as 3 fewer hedge funds owned it on September 30 as did on June 30. At the end of this article we will also compare GNC to other stocks including Dean Foods Co (NYSE:DF), Party City Holdco Inc (NYSE:PRTY), and Werner Enterprises, Inc. (NASDAQ:WERN) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

How have hedgies been trading GNC Holdings Inc (NYSE:GNC)?

Heading into the fourth quarter of 2016, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a decline of 10% from one quarter earlier. That dropped GNC back down near its low point in hedge fund ownership during the past five quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Millennium Management, managed by Israel Englander, holds the most valuable position in GNC Holdings Inc (NYSE:GNC). Millennium Management has an $18.9 million position in the stock. The second largest stake is held by HealthInvest Partners AB, led by Anders Hallberg and Carl Bennet, holding a $9.9 million position; 7.3% of its 13F portfolio is allocated to the stock. Some other professional money managers that hold long positions include John Overdeck and David Siegel’s Two Sigma Advisors and Larry Chen and Terry Zhang’s Tairen Capital.

Due to the fact that GNC Holdings Inc (NYSE:GNC) has faced declining sentiment from hedge fund managers, we can see that there is a sect of fund managers who sold off their positions entirely heading into Q4. Intriguingly, Dinakar Singh’s TPG-AXON Management LP dropped the largest investment of the “upper crust” of funds watched by Insider Monkey, worth an estimated $74.3 million in stock. John Burbank’s fund, Passport Capital, also cut its stock, about $24.3 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 3 funds heading into Q4.

Let’s go over hedge fund activity in other stocks similar to GNC Holdings Inc (NYSE:GNC). These stocks are Dean Foods Co (NYSE:DF), Party City Holdco Inc (NYSE:PRTY), Werner Enterprises, Inc. (NASDAQ:WERN), and Cambrex Corporation (NYSE:CBM). All of these stocks’ market caps match GNC’s market cap.

As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $79 million. That figure was $116 million in GNC’s case. Dean Foods Co (NYSE:DF) is the most popular stock in this table. On the other hand Party City Holdco Inc (NYSE:PRTY) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks GNC Holdings Inc (NYSE:GNC) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio, bearing in mind that ownership of it has fallen quite a lot in the last year.

Disclosure: None