Hedge Funds Dropped The Ball On Gardner Denver Holdings, Inc. (GDI)

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the third quarter. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Gardner Denver Holdings, Inc. (NYSE:GDI).

Is Gardner Denver Holdings, Inc. (NYSE:GDI) the right investment to pursue these days? Investors who are in the know are turning less bullish. The number of long hedge fund bets were cut by 9 lately. Our calculations also showed that GDI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). GDI was in 15 hedge funds’ portfolios at the end of September. There were 24 hedge funds in our database with GDI positions at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Andreas Halvorsen

Andreas Halvorsen of Viking Global

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s analyze the latest hedge fund action regarding Gardner Denver Holdings, Inc. (NYSE:GDI).

How are hedge funds trading Gardner Denver Holdings, Inc. (NYSE:GDI)?

At the end of the third quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -38% from the second quarter of 2019. On the other hand, there were a total of 24 hedge funds with a bullish position in GDI a year ago. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

Is GDI A Good Stock To Buy?

More specifically, Viking Global was the largest shareholder of Gardner Denver Holdings, Inc. (NYSE:GDI), with a stake worth $224.4 million reported as of the end of September. Trailing Viking Global was Goodnow Investment Group, which amassed a stake valued at $44.8 million. Holocene Advisors, Two Sigma Advisors, and D E Shaw 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 Goodnow Investment Group allocated the biggest weight to Gardner Denver Holdings, Inc. (NYSE:GDI), around 6.36% of its 13F portfolio. Viking Global is also relatively very bullish on the stock, setting aside 1.17 percent of its 13F equity portfolio to GDI.

Because Gardner Denver Holdings, Inc. (NYSE:GDI) has witnessed falling interest from the entirety of the hedge funds we track, it’s easy to see that there is a sect of hedge funds that elected to cut their full holdings by the end of the third quarter. It’s worth mentioning that Alexander Mitchell’s Scopus Asset Management dumped the biggest position of the “upper crust” of funds tracked by Insider Monkey, comprising close to $20.2 million in stock. Phill Gross and Robert Atchinson’s fund, Adage Capital Management, also said goodbye to its stock, about $15.7 million worth. These transactions are important to note, as total hedge fund interest was cut by 9 funds by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks similar to Gardner Denver Holdings, Inc. (NYSE:GDI). These stocks are SYNNEX Corporation (NYSE:SNX), AGCO Corporation (NYSE:AGCO), Kinross Gold Corporation (NYSE:KGC), and Toll Brothers Inc (NYSE:TOL). This group of stocks’ market caps are closest to GDI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SNX 21 225461 3
AGCO 24 243089 -1
KGC 26 436214 8
TOL 22 483101 2
Average 23.25 346966 3

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $347 million. That figure was $379 million in GDI’s case. Kinross Gold Corporation (NYSE:KGC) is the most popular stock in this table. On the other hand SYNNEX Corporation (NYSE:SNX) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Gardner Denver Holdings, Inc. (NYSE:GDI) is even less popular than SNX. Hedge funds clearly dropped the ball on GDI as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on GDI as the stock returned 19.7% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.

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