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Hedge Funds Aren’t Crazy About Gartner Inc (IT) Anymore

“Market conditions are changing. The continued rise in interest rates suggests we are in the early stages of a bond bear market, which could intensify as central banks withdraw liquidity. The receding tide of liquidity will start to reveal more rocks beyond what has been exposed in emerging markets so far, and the value of a value discipline will be in avoiding the biggest capital-destroying rocks. If a rock emerges on the crowded shore of U.S. momentum, it could result in a major liquidity challenge, as momentum is often most intense on the downside as a crowded trade reverses. So investors are facing a large potential trade-off right now: continue to bet on the current dominance of momentum and the S&P 500, or bet on change and take an active value bet in names with attractive value and optionality, but with negative momentum,” said Clearbridge Investments in its market commentary. We aren’t sure whether long-term interest rates will top 5% and value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Gartner Inc (NYSE:IT).

Gartner Inc (NYSE:IT) has seen a decrease in support from the world’s most elite money managers of late. IT was in 13 hedge funds’ portfolios at the end of September. There were 21 hedge funds in our database with IT holdings at the end of the previous quarter. Our calculations also showed that IT isn’t among the 30 most popular stocks among hedge funds.

In today’s marketplace there are several formulas stock market investors can use to grade their holdings. A couple of the most useful formulas are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the best picks of the elite hedge fund managers can outperform the market by a very impressive margin (see the details here).

Gabriel Plotkin Melvin Capital Management

We’re going to go over the recent hedge fund action encompassing Gartner Inc (NYSE:IT).

How have hedgies been trading Gartner Inc (NYSE:IT)?

At Q3’s end, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of -38% from the second quarter of 2018. By comparison, 17 hedge funds held shares or bullish call options in IT heading into this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

IT_dec2018

The largest stake in Gartner Inc (NYSE:IT) was held by Select Equity Group, which reported holding $738.1 million worth of stock at the end of September. It was followed by Bares Capital Management with a $347.1 million position. Other investors bullish on the company included Melvin Capital Management, Nitorum Capital, and Royce & Associates.

Since Gartner Inc (NYSE:IT) has experienced bearish sentiment from hedge fund managers, it’s safe to say that there exists a select few hedge funds that decided to sell off their entire stakes heading into Q3. Intriguingly, James Parsons’s Junto Capital Management said goodbye to the largest investment of all the hedgies tracked by Insider Monkey, totaling an estimated $53.3 million in stock. Michael Platt and William Reeves’s fund, BlueCrest Capital Mgmt., also sold off its stock, about $12.2 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 8 funds heading into Q3.

Let’s now take a look at hedge fund activity in other stocks similar to Gartner Inc (NYSE:IT). These stocks are Godaddy Inc (NYSE:GDDY), The Liberty SiriusXM Group (NASDAQ:LSXMK), Xylem Inc (NYSE:XYL), and TechnipFMC plc (NYSE:FTI). This group of stocks’ market values resemble IT’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GDDY 48 3169488 6
LSXMK 48 3322137 4
XYL 20 616781 -1
FTI 23 526729 -3
Average 34.75 1908784 1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.75 hedge funds with bullish positions and the average amount invested in these stocks was $1.91 billion. That figure was $1.27 billion in IT’s case. Godaddy Inc (NYSE:GDDY) is the most popular stock in this table. On the other hand Xylem Inc (NYSE:XYL) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks Gartner Inc (NYSE:IT) is even less popular than XYL. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

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

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