Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards GrafTech International Ltd. (NYSE:EAF).
GrafTech International Ltd. (NYSE:EAF) shareholders have witnessed an increase in hedge fund sentiment lately. GrafTech International Ltd. (NYSE:EAF) was in 38 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 33. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that EAF isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
According to most shareholders, hedge funds are viewed as worthless, outdated investment tools of years past. While there are more than 8000 funds in operation at present, We look at the elite of this group, approximately 850 funds. These hedge fund managers orchestrate most of all hedge funds’ total asset base, and by shadowing their matchless picks, Insider Monkey has figured out a few investment strategies that have historically surpassed the broader indices. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .
Donald Yacktman of Yacktman Asset Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let’s view the latest hedge fund action surrounding GrafTech International Ltd. (NYSE:EAF).
Do Hedge Funds Think EAF Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 38 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 19% from one quarter earlier. By comparison, 23 hedge funds held shares or bullish call options in EAF a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Yacktman Asset Management held the most valuable stake in GrafTech International Ltd. (NYSE:EAF), which was worth $65 million at the end of the fourth quarter. On the second spot was AQR Capital Management which amassed $40.4 million worth of shares. Arrowstreet Capital, Indus Capital, and Luminus 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 Indus Capital allocated the biggest weight to GrafTech International Ltd. (NYSE:EAF), around 5.43% of its 13F portfolio. Luminus Management is also relatively very bullish on the stock, setting aside 4.56 percent of its 13F equity portfolio to EAF.
As one would reasonably expect, some big names have been driving this bullishness. Royce & Associates, managed by Chuck Royce, created the largest position in GrafTech International Ltd. (NYSE:EAF). Royce & Associates had $16.4 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $15 million investment in the stock during the quarter. The other funds with brand new EAF positions are Philippe Laffont’s Coatue Management, Don Morgan’s Brigade Capital, and D. E. Shaw’s D E Shaw.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as GrafTech International Ltd. (NYSE:EAF) but similarly valued. We will take a look at Compania Cervecerias Unidas S.A. (NYSE:CCU), MakeMyTrip Limited (NASDAQ:MMYT), Berkeley Lights, Inc. (NASDAQ:BLI), Fluor Corporation (NYSE:FLR), Apple Hospitality REIT Inc (NYSE:APLE), Casella Waste Systems Inc. (NASDAQ:CWST), and Energizer Holdings, Inc. (NYSE:ENR). This group of stocks’ market valuations are closest to EAF’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CCU | 7 | 22493 | -1 |
| MMYT | 9 | 49170 | 2 |
| BLI | 16 | 410653 | 0 |
| FLR | 17 | 199311 | -3 |
| APLE | 17 | 203355 | 1 |
| CWST | 20 | 107302 | 1 |
| ENR | 22 | 237518 | -4 |
| Average | 15.4 | 175686 | -0.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.4 hedge funds with bullish positions and the average amount invested in these stocks was $176 million. That figure was $417 million in EAF’s case. Energizer Holdings, Inc. (NYSE:ENR) is the most popular stock in this table. On the other hand Compania Cervecerias Unidas S.A. (NYSE:CCU) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks GrafTech International Ltd. (NYSE:EAF) is more popular among hedge funds. Our overall hedge fund sentiment score for EAF is 90. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 19.3% in 2021 through June 25th and still beat the market by 4.8 percentage points. Unfortunately EAF wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on EAF were disappointed as the stock returned -1.6% since the end of the first quarter (through 6/25) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
Follow Graftech International Ltd (NYSE:EAF)
Follow Graftech International Ltd (NYSE:EAF)
Suggested Articles:
- How to Best Use Insider Monkey To Increase Your Returns
- 10 Biggest Hedge Fund Failures
- 15 Biggest Steel Companies In The World
Disclosure: None. This article was originally published at Insider Monkey.
