We at Insider Monkey have gone over 730 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of June 28th. In this article, we look at what those funds think of Garmin Ltd. (NASDAQ:GRMN) based on that data.
Is Garmin Ltd. (NASDAQ:GRMN) a good investment now? The smart money is betting on the stock. The number of long hedge fund bets improved by 5 in recent months. Our calculations also showed that GRMN isn’t among the 30 most popular stocks among hedge funds. GRMN was in 32 hedge funds’ portfolios at the end of the second quarter of 2019. There were 27 hedge funds in our database with GRMN positions at the end of the previous quarter.
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 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Cliff Asness of AQR Capital Management
Unlike some fund managers who are betting on Dow reaching 40000 in a year, 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. Let’s analyze the key hedge fund action surrounding Garmin Ltd. (NASDAQ:GRMN).
What have hedge funds been doing with Garmin Ltd. (NASDAQ:GRMN)?
Heading into the third quarter of 2019, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 19% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards GRMN over the last 16 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, D E Shaw was the largest shareholder of Garmin Ltd. (NASDAQ:GRMN), with a stake worth $106.1 million reported as of the end of March. Trailing D E Shaw was AQR Capital Management, which amassed a stake valued at $83.5 million. Select Equity Group, Arrowstreet Capital, and Marshall Wace LLP were also very fond of the stock, giving the stock large weights in their portfolios.
With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Maverick Capital, managed by Lee Ainslie, established the largest position in Garmin Ltd. (NASDAQ:GRMN). Maverick Capital had $3.3 million invested in the company at the end of the quarter. Minhua Zhang’s Weld Capital Management also made a $2.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Mike Vranos’s Ellington, Paul Tudor Jones’s Tudor Investment Corp, and Perella Weinberg Partners.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Garmin Ltd. (NASDAQ:GRMN) but similarly valued. We will take a look at Arch Capital Group Ltd. (NASDAQ:ACGL), EXACT Sciences Corporation (NASDAQ:EXAS), Waters Corporation (NYSE:WAT), and Regions Financial Corporation (NYSE:RF). This group of stocks’ market values resemble GRMN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ACGL | 23 | 1291283 | 11 |
| EXAS | 32 | 837125 | -1 |
| WAT | 26 | 603252 | -4 |
| RF | 32 | 700009 | -9 |
| Average | 28.25 | 857917 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.25 hedge funds with bullish positions and the average amount invested in these stocks was $858 million. That figure was $456 million in GRMN’s case. EXACT Sciences Corporation (NASDAQ:EXAS) is the most popular stock in this table. On the other hand Arch Capital Group Ltd. (NASDAQ:ACGL) is the least popular one with only 23 bullish hedge fund positions. Garmin Ltd. (NASDAQ:GRMN) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks (view the video below) among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on GRMN as the stock returned 6.8% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
