“October lived up to its scary reputation—the S&P 500 falling in the month by the largest amount in the last 40 years, the only worse Octobers being ’08 and the Crash of ’87. For perspective, there have been only 5 occasions in those 40 years when the S&P 500 declined by greater than 20% from peak to trough. Other than the ’87 Crash, all were during recessions. There were 17 other instances, over the same time frame, when the market fell by over 10% but less than 20%. Furthermore, this is the 18th correction of 5% or more since the current bull market started in March ’09. Corrections are the norm. They can be healthy as they often undo market complacency—overbought levels—potentially allowing the market to base and move even higher.” This is how Trapeze Asset Management summarized the recent market moves in its investor letter. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards one of the stocks hedge funds invest in.
Is Garrett Motion Inc. (NYSE:GTX) worth your attention right now? Hedge funds are becoming more confident. The number of bullish hedge fund positions moved up by 8 recently. Our calculations also showed that GTX isn’t among the 30 most popular stocks among hedge funds. GTX was in 13 hedge funds’ portfolios at the end of December. There were 5 hedge funds in our database with GTX holdings at the end of the previous quarter.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let’s take a peek at the fresh hedge fund action regarding Garrett Motion Inc. (NYSE:GTX).
How are hedge funds trading Garrett Motion Inc. (NYSE:GTX)?
Heading into the first quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 160% from one quarter earlier. On the other hand, there were a total of 0 hedge funds with a bullish position in GTX a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key 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 $86.8 million reported as of the end of December. Trailing Deccan Value Advisors was Sessa Capital, which amassed a stake valued at $71.2 million. Gates Capital Management, Newtyn Management, and GAMCO Investors were also very fond of the stock, giving the stock large weights in their portfolios.
Consequently, key money managers have been driving this bullishness. Sessa Capital, managed by John Petry, established the most valuable position in Garrett Motion Inc. (NYSE:GTX). Sessa Capital had $71.2 million invested in the company at the end of the quarter. Noah Levy and Eugene Dozortsev’s Newtyn Management also initiated a $16.6 million position during the quarter. The other funds with brand new GTX positions are Mario Gabelli’s GAMCO Investors, D. E. Shaw’s D E Shaw, and Prem Watsa’s Fairfax Financial Holdings.
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. These stocks are GasLog Partners LP (NYSE:GLOP), Materion Corp (NYSE:MTRN), Carbon Black, Inc. (NASDAQ:CBLK), and Audentes Therapeutics, Inc. (NASDAQ:BOLD). All of these stocks’ market caps match GTX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GLOP | 7 | 24080 | 2 |
| MTRN | 17 | 81722 | 4 |
| CBLK | 17 | 46776 | 8 |
| BOLD | 24 | 349589 | 7 |
| Average | 16.25 | 125542 | 5.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $126 million. That figure was $214 million in GTX’s case. Audentes Therapeutics, Inc. (NASDAQ:BOLD) is the most popular stock in this table. On the other hand GasLog Partners LP (NYSE:GLOP) is the least popular one with only 7 bullish hedge fund positions. Garrett Motion Inc. (NYSE:GTX) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on GTX as the stock returned 56.2% and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.