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Hedge Funds Never Been Less Bullish On Grupo Financiero Galicia S.A. (GGAL)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Grupo Financiero Galicia S.A. (NASDAQ:GGAL) based on that data.

Grupo Financiero Galicia S.A. (NASDAQ:GGAL) has experienced a decrease in activity from the world’s largest hedge funds recently. GGAL was in 6 hedge funds’ portfolios at the end of March. There were 8 hedge funds in our database with GGAL holdings at the end of the previous quarter. Our calculations also showed that GGAL 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.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Crispin Odey of Odey Asset Management Group

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s analyze the fresh hedge fund action encompassing Grupo Financiero Galicia S.A. (NASDAQ:GGAL).

What have hedge funds been doing with Grupo Financiero Galicia S.A. (NASDAQ:GGAL)?

Heading into the second quarter of 2020, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the previous quarter. On the other hand, there were a total of 17 hedge funds with a bullish position in GGAL a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

The largest stake in Grupo Financiero Galicia S.A. (NASDAQ:GGAL) was held by Arrowstreet Capital, which reported holding $6.5 million worth of stock at the end of September. It was followed by Odey Asset Management Group with a $4.1 million position. Other investors bullish on the company included Citadel Investment Group, D E Shaw, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Odey Asset Management Group allocated the biggest weight to Grupo Financiero Galicia S.A. (NASDAQ:GGAL), around 0.69% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, setting aside 0.02 percent of its 13F equity portfolio to GGAL.

Judging by the fact that Grupo Financiero Galicia S.A. (NASDAQ:GGAL) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there lies a certain “tier” of hedgies that elected to cut their positions entirely by the end of the first quarter. Intriguingly, Leonard A. Potter’s Wildcat Capital Management dropped the biggest investment of all the hedgies watched by Insider Monkey, valued at an estimated $2.8 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund dumped about $1.3 million worth. These transactions are interesting, as total hedge fund interest was cut by 2 funds by the end of the first quarter.

Let’s now review hedge fund activity in other stocks similar to Grupo Financiero Galicia S.A. (NASDAQ:GGAL). These stocks are Calavo Growers, Inc. (NASDAQ:CVGW), NextCure, Inc. (NASDAQ:NXTC), Red Rock Resorts, Inc. (NASDAQ:RRR), and Atkore International Group Inc. (NYSE:ATKR). This group of stocks’ market valuations are closest to GGAL’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CVGW 11 63039 -12
NXTC 14 235494 -3
RRR 25 158626 7
ATKR 13 59916 -10
Average 15.75 129269 -4.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $129 million. That figure was $12 million in GGAL’s case. Red Rock Resorts, Inc. (NASDAQ:RRR) is the most popular stock in this table. On the other hand Calavo Growers, Inc. (NASDAQ:CVGW) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Grupo Financiero Galicia S.A. (NASDAQ:GGAL) is even less popular than CVGW. Hedge funds clearly dropped the ball on GGAL as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 13.9% in 2020 through June 10th and still beat the market by 14.2 percentage points. A small number of hedge funds were also right about betting on GGAL as the stock returned 54% so far in the second quarter and outperformed the market by an even larger margin.

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