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Hedge Funds Souring On Gates Industrial Corporation plc (GTES)

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Gates Industrial Corporation plc (NYSE:GTES) based on those filings.

Gates Industrial Corporation plc (NYSE:GTES) has seen a decrease in hedge fund interest in recent months. Our calculations also showed that GTES 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.

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 monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

CITADEL INVESTMENT GROUP

Ken Griffin of Citadel Investment Group

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. 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. Now we’re going to check out the latest hedge fund action encompassing Gates Industrial Corporation plc (NYSE:GTES).

Hedge fund activity in Gates Industrial Corporation plc (NYSE:GTES)

Heading into the second quarter of 2020, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from the previous quarter. On the other hand, there were a total of 9 hedge funds with a bullish position in GTES a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is GTES A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Adage Capital Management, managed by Phill Gross and Robert Atchinson, holds the largest position in Gates Industrial Corporation plc (NYSE:GTES). Adage Capital Management has a $20.1 million position in the stock, comprising 0.1% of its 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, led by Ken Griffin, holding a $1.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism comprise David Harding’s Winton Capital Management, Israel Englander’s Millennium Management and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position Adage Capital Management allocated the biggest weight to Gates Industrial Corporation plc (NYSE:GTES), around 0.06% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, dishing out 0.02 percent of its 13F equity portfolio to GTES.

Judging by the fact that Gates Industrial Corporation plc (NYSE:GTES) has experienced a decline in interest from hedge fund managers, it’s easy to see that there exists a select few funds that slashed their positions entirely last quarter. Interestingly, Robert Vincent McHugh’s Jade Capital Advisors dropped the biggest stake of the 750 funds watched by Insider Monkey, comprising close to $1.2 million in stock. Mark McMeans’s fund, Brasada Capital Management, also cut its stock, about $0.4 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 1 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Gates Industrial Corporation plc (NYSE:GTES). These stocks are CenterState Bank Corporation (NASDAQ:CSFL), CarGurus, Inc. (NASDAQ:CARG), WNS (Holdings) Limited (NYSE:WNS), and Kodiak Sciences Inc (NASDAQ:KOD). All of these stocks’ market caps are closest to GTES’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CSFL 14 48481 -2
CARG 26 485392 -7
WNS 17 184501 -3
KOD 12 770396 1
Average 17.25 372193 -2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $372 million. That figure was $23 million in GTES’s case. CarGurus, Inc. (NASDAQ:CARG) is the most popular stock in this table. On the other hand Kodiak Sciences Inc (NASDAQ:KOD) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Gates Industrial Corporation plc (NYSE:GTES) is even less popular than KOD. Hedge funds clearly dropped the ball on GTES 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 12.2% in 2020 through June 17th and still beat the market by 14.8 percentage points. A small number of hedge funds were also right about betting on GTES as the stock returned 45.1% 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.