At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Gentex Corporation (NASDAQ:GNTX) at the end of the second quarter and determine whether the smart money was really smart about this stock.
Is Gentex Corporation (NASDAQ:GNTX) going to take off soon? Prominent investors were taking an optimistic view. The number of long hedge fund positions rose by 1 recently. Gentex Corporation (NASDAQ:GNTX) was in 38 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 37. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that GNTX isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
At the moment there are a large number of signals investors have at their disposal to analyze publicly traded companies. Some of the most underrated signals are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the top picks of the best investment managers can trounce the market by a superb margin (see the details here).
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now we’re going to review the fresh hedge fund action surrounding Gentex Corporation (NASDAQ:GNTX).
What does smart money think about Gentex Corporation (NASDAQ:GNTX)?
At the end of June, a total of 38 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in GNTX over the last 20 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Gentex Corporation (NASDAQ:GNTX), which was worth $114.5 million at the end of the third quarter. On the second spot was Adage Capital Management which amassed $100.8 million worth of shares. Nitorum Capital, Royce & Associates, and Arrowstreet Capital 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 Nitorum Capital allocated the biggest weight to Gentex Corporation (NASDAQ:GNTX), around 3.93% of its 13F portfolio. Nishkama Capital is also relatively very bullish on the stock, designating 2.93 percent of its 13F equity portfolio to GNTX.
As industrywide interest jumped, key money managers have jumped into Gentex Corporation (NASDAQ:GNTX) headfirst. Nishkama Capital, managed by Ravee Mehta, established the biggest position in Gentex Corporation (NASDAQ:GNTX). Nishkama Capital had $6.9 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also made a $4.2 million investment in the stock during the quarter. The other funds with brand new GNTX positions are Michael Gelband’s ExodusPoint Capital, Brandon Haley’s Holocene Advisors, and Thomas Bailard’s Bailard Inc.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Gentex Corporation (NASDAQ:GNTX) but similarly valued. We will take a look at Pentair plc (NYSE:PNR), Bruker Corporation (NASDAQ:BRKR), TIM Participacoes SA (NYSE:TSU), Anaplan, Inc. (NYSE:PLAN), MKS Instruments, Inc. (NASDAQ:MKSI), PRA Health Sciences Inc (NASDAQ:PRAH), and Herbalife Nutrition Ltd. (NYSE:HLF). This group of stocks’ market valuations match GNTX’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.4 hedge funds with bullish positions and the average amount invested in these stocks was $946 million. That figure was $555 million in GNTX’s case. Anaplan, Inc. (NYSE:PLAN) is the most popular stock in this table. On the other hand TIM Participacoes SA (NYSE:TSU) is the least popular one with only 15 bullish hedge fund positions. Gentex Corporation (NASDAQ:GNTX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GNTX is 69.8. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately GNTX wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on GNTX were disappointed as the stock returned 5.5% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.