The market has been volatile as the Federal Reserve winds down its easy money policies. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 14 percentage points between June 25th and the end of October. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure, and the funds’ movements is one of the reasons why the major indexes have retraced. In this article, we analyze what the smart money thinks of Garmin Ltd. (NASDAQ:GRMN) and find out how it is affected by hedge funds’ moves.
Garmin Ltd. (NASDAQ:GRMN) has seen a decrease in enthusiasm from smart money in recent months. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Spirit AeroSystems Holdings, Inc. (NYSE:SPR), Envision Healthcare Holdings Inc (NYSE:EVHC), and Harman International Industries Inc./DE/ (NYSE:HAR) to gather more data points.
In the eyes of most investors, hedge funds are assumed to be unimportant, outdated investment vehicles of the past. While there are more than 8,000 funds in operation at present, Our researchers hone in on the top tier of this club, approximately 700 funds. Most estimates calculate that this group of people preside over bulk of the hedge fund industry’s total capital, and by watching their matchless investments, Insider Monkey has formulated numerous investment strategies that have historically beaten Mr. Market. Insider Monkey’s small-cap hedge fund strategy outperformed the S&P 500 index by 12 percentage points per year for a decade in their back tests.
Keeping this in mind, let’s take a glance at the fresh action surrounding Garmin Ltd. (NASDAQ:GRMN).
Hedge fund activity in Garmin Ltd. (NASDAQ:GRMN)
At Q3’s end, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the previous quarter. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Jim Simons’ Renaissance Technologies has the largest position in Garmin Ltd. (NASDAQ:GRMN), worth close to $47.3 million, accounting for 0.1% of its total 13F portfolio. The second largest stake is held by David Einhorn of Greenlight Capital, with an $22.4 million position; 0.4% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that are bullish include Joel Greenblatt’s Gotham Asset Management, David Harding’s Winton Capital Management and Cliff Asness’ AQR Capital Management.
Due to the fact that Garmin Ltd. (NASDAQ:GRMN) has faced declining sentiment from the aggregate hedge fund industry, we can see that there was a specific group of fund managers that decided to sell off their positions entirely by the end of the third quarter. At the top of the heap, Dmitry Balyasny’s Balyasny Asset Management said goodbye to the biggest investment of the “upper crust” of funds followed by Insider Monkey, worth an estimated $12 million in stock. Brian Ashford-Russell and Tim Woolley’s fund, Polar Capital, also dumped its stock, about $6.4 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 3 funds by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Garmin Ltd. (NASDAQ:GRMN). These stocks are Spirit AeroSystems Holdings, Inc. (NYSE:SPR), Envision Healthcare Holdings Inc (NYSE:EVHC), Harman International Industries Inc./DE/ (NYSE:HAR), and IDEXX Laboratories, Inc. (NASDAQ:IDXX). This group of stocks’ market valuations resemble GRMN’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 33.75 hedge funds with bullish positions and the average amount invested in these stocks was $1268 million. That figure was $147 million in GRMN’s case. Spirit AeroSystems Holdings, Inc. (NYSE:SPR) is the most popular stock in this table. On the other hand IDEXX Laboratories, Inc. (NASDAQ:IDXX) is the least popular one with only 26 bullish hedge fund positions. Compared to these stocks Garmin Ltd. (NASDAQ:GRMN) is even less popular than IDXX. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.