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Hedge Funds Never Been Less Bullish On GCP Applied Technologies Inc. (GCP)

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtGCP Applied Technologies Inc. (NYSE:GCP) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

GCP Applied Technologies Inc. (NYSE:GCP) was in 12 hedge funds’ portfolios at the end of the first quarter of 2020. GCP has seen a decrease in activity from the world’s largest hedge funds in recent months. There were 20 hedge funds in our database with GCP positions at the end of the previous quarter. Our calculations also showed that GCP isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

If you’d ask most traders, hedge funds are viewed as unimportant, outdated financial tools of years past. While there are over 8000 funds trading at present, We hone in on the aristocrats of this group, around 850 funds. These investment experts administer the lion’s share of the hedge fund industry’s total asset base, and by paying attention to their first-class equity investments, Insider Monkey has deciphered a number of investment strategies that have historically outrun the market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

David Winters

David S. Winter of 40 North Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to analyze the key hedge fund action surrounding GCP Applied Technologies Inc. (NYSE:GCP).

Hedge fund activity in GCP Applied Technologies Inc. (NYSE:GCP)

Heading into the second quarter of 2020, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -40% from the fourth quarter of 2019. On the other hand, there were a total of 26 hedge funds with a bullish position in GCP a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

The largest stake in GCP Applied Technologies Inc. (NYSE:GCP) was held by Starboard Value LP, which reported holding $116.4 million worth of stock at the end of September. It was followed by 40 North Management with a $91 million position. Other investors bullish on the company included GAMCO Investors, Adage Capital Management, and Greenhouse Funds. In terms of the portfolio weights assigned to each position 40 North Management allocated the biggest weight to GCP Applied Technologies Inc. (NYSE:GCP), around 5.54% of its 13F portfolio. Starboard Value LP is also relatively very bullish on the stock, setting aside 4.72 percent of its 13F equity portfolio to GCP.

Because GCP Applied Technologies Inc. (NYSE:GCP) has faced declining sentiment from the aggregate hedge fund industry, it’s easy to see that there were a few money managers that elected to cut their full holdings heading into Q4. It’s worth mentioning that Israel Englander’s Millennium Management cut the biggest stake of the “upper crust” of funds monitored by Insider Monkey, worth close to $11.3 million in stock. Brandon Haley’s fund, Holocene Advisors, also cut its stock, about $0.5 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 8 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks similar to GCP Applied Technologies Inc. (NYSE:GCP). We will take a look at Safety Insurance Group, Inc. (NASDAQ:SAFT), Extended Stay America Inc (NASDAQ:STAY), First Majestic Silver Corp (NYSE:AG), and Cubic Corporation (NYSE:CUB). This group of stocks’ market caps are similar to GCP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SAFT 12 47637 -3
STAY 18 260865 -17
AG 13 58265 -3
CUB 17 20747 -2
Average 15 96879 -6.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $97 million. That figure was $328 million in GCP’s case. Extended Stay America Inc (NASDAQ:STAY) is the most popular stock in this table. On the other hand Safety Insurance Group, Inc. (NASDAQ:SAFT) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks GCP Applied Technologies Inc. (NYSE:GCP) is even less popular than SAFT. Hedge funds dodged a bullet by taking a bearish stance towards GCP. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but managed to beat the market by 15.5 percentage points. Unfortunately GCP wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); GCP investors were disappointed as the stock returned 4.4% during the second quarter 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 most of these stocks already outperformed the market so far in 2020.

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Disclosure: None. This article was originally published at Insider Monkey.