Here is What Hedge Funds Think About GrafTech International Ltd. (EAF)

At Insider Monkey, we pore over the filings of nearly 873 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of June 30th. In this article, we will use that wealth of knowledge to determine whether or not GrafTech International Ltd. (NYSE:EAF) makes for a good investment right now.

Is GrafTech International Ltd. (NYSE:EAF) an exceptional investment today? The smart money was cutting their exposure. The number of bullish hedge fund positions fell by 2 in recent months. GrafTech International Ltd. (NYSE:EAF) was in 36 hedge funds’ portfolios at the end of June. The all time high for this statistic is 38. Our calculations also showed that EAF isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 38 hedge funds in our database with EAF holdings at the end of March.

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Donald Yacktman of Yacktman Asset Management

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Do Hedge Funds Think EAF Is A Good Stock To Buy Now?

At the end of the second quarter, a total of 36 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from the first quarter of 2020. By comparison, 24 hedge funds held shares or bullish call options in EAF a year ago. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

Is EAF A Good Stock To Buy?

The largest stake in GrafTech International Ltd. (NYSE:EAF) was held by Yacktman Asset Management, which reported holding $61.3 million worth of stock at the end of June. It was followed by Arrowstreet Capital with a $39 million position. Other investors bullish on the company included AQR Capital Management, Indus Capital, and Royce & Associates. In terms of the portfolio weights assigned to each position Indus Capital allocated the biggest weight to GrafTech International Ltd. (NYSE:EAF), around 5.13% of its 13F portfolio. Luminus Management is also relatively very bullish on the stock, earmarking 1.23 percent of its 13F equity portfolio to EAF.

Since GrafTech International Ltd. (NYSE:EAF) has witnessed declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of money managers who sold off their entire stakes heading into Q3. Intriguingly,  Renaissance Technologies dropped the largest investment of the “upper crust” of funds monitored by Insider Monkey, worth an estimated $20 million in stock, and Prem Watsa’s Fairfax Financial Holdings was right behind this move, as the fund sold off about $10.3 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 2 funds heading into Q3.

Let’s check out hedge fund activity in other stocks similar to GrafTech International Ltd. (NYSE:EAF). These stocks are 2U Inc (NASDAQ:TWOU), Phreesia, Inc. (NYSE:PHR), Pebblebrook Hotel Trust (NYSE:PEB), Livent Corporation (NYSE:LTHM), American Equity Investment Life Holding Company (NYSE:AEL), Burning Rock Biotech Limited (NASDAQ:BNR), and National Health Investors Inc (NYSE:NHI). This group of stocks’ market values match EAF’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TWOU 25 757888 2
PHR 26 226853 -1
PEB 17 57810 7
LTHM 27 251159 5
AEL 20 187474 -4
BNR 9 81726 -2
NHI 13 45554 2
Average 19.6 229781 1.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.6 hedge funds with bullish positions and the average amount invested in these stocks was $230 million. That figure was $377 million in EAF’s case. Livent Corporation (NYSE:LTHM) is the most popular stock in this table. On the other hand Burning Rock Biotech Limited (NASDAQ:BNR) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks GrafTech International Ltd. (NYSE:EAF) is more popular among hedge funds. Our overall hedge fund sentiment score for EAF is 81.4. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 21.8% in 2021 through October 11th and still beat the market by 4.4 percentage points. Unfortunately EAF wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on EAF were disappointed as the stock returned -10.5% since the end of the second quarter (through 10/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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