Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before last year’s Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Garrett Motion Inc. (NYSE:GTX) changed recently.
Garrett Motion Inc. (NYSE:GTX) investors should be aware of an increase in activity from the world’s largest hedge funds lately. GTX was in 27 hedge funds’ portfolios at the end of the third quarter of 2019. There were 23 hedge funds in our database with GTX holdings at the end of the previous quarter. Our calculations also showed that GTX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
According to most shareholders, hedge funds are perceived as slow, outdated financial tools of years past. While there are over 8000 funds trading at present, Our experts choose to focus on the upper echelon of this group, about 750 funds. Most estimates calculate that this group of people have their hands on bulk of the hedge fund industry’s total asset base, and by paying attention to their top stock picks, Insider Monkey has deciphered many investment strategies that have historically exceeded the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points a year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Sander Gerber of Hudson Bay Capital Management
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a look at the key hedge fund action encompassing Garrett Motion Inc. (NYSE:GTX).
How are hedge funds trading Garrett Motion Inc. (NYSE:GTX)?
Heading into the fourth quarter of 2019, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of 17% from the second quarter of 2019. On the other hand, there were a total of 5 hedge funds with a bullish position in GTX a year ago. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
More specifically, Deccan Value Advisors was the largest shareholder of Garrett Motion Inc. (NYSE:GTX), with a stake worth $73 million reported as of the end of September. Trailing Deccan Value Advisors was Sessa Capital, which amassed a stake valued at $66.3 million. Newtyn Management, Point72 Asset Management, and Solas Capital Management 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 Solas Capital Management allocated the biggest weight to Garrett Motion Inc. (NYSE:GTX), around 7.73% of its portfolio. Sessa Capital is also relatively very bullish on the stock, dishing out 7.56 percent of its 13F equity portfolio to GTX.
With a general bullishness amongst the heavyweights, some big names were leading the bulls’ herd. Newtyn Management, managed by Noah Levy and Eugene Dozortsev, created the biggest call position in Garrett Motion Inc. (NYSE:GTX). Newtyn Management had $3.2 million invested in the company at the end of the quarter. Sander Gerber’s Hudson Bay Capital Management also initiated a $2.7 million position during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace’s Marshall Wace, Phill Gross and Robert Atchinson’s Adage Capital Management, and Ken Griffin’s Citadel Investment Group.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Garrett Motion Inc. (NYSE:GTX) but similarly valued. We will take a look at ChipMOS TECHNOLOGIES INC. (NASDAQ:IMOS), Bryn Mawr Bank Corp. (NASDAQ:BMTC), Whiting Petroleum Corporation (NYSE:WLL), and The Andersons, Inc. (NASDAQ:ANDE). This group of stocks’ market valuations match GTX’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IMOS | 3 | 33579 | 1 |
| BMTC | 9 | 36594 | 0 |
| WLL | 25 | 58618 | 2 |
| ANDE | 14 | 52713 | 9 |
| Average | 12.75 | 45376 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $45 million. That figure was $208 million in GTX’s case. Whiting Petroleum Corporation (NYSE:WLL) is the most popular stock in this table. On the other hand ChipMOS TECHNOLOGIES INC. (NASDAQ:IMOS) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Garrett Motion Inc. (NYSE:GTX) is more popular among hedge funds. 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. Hedge funds were also right about betting on GTX as the stock returned 16.2% during the first two months of Q4 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
