Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Grupo Financiero Galicia S.A. (NASDAQ:GGAL).
Grupo Financiero Galicia S.A. (NASDAQ:GGAL) shares haven’t seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged. The stock was in 8 hedge funds’ portfolios at the end of December. 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 Banco Macro SA (NYSE:BMA), Colony Capital Inc (NYSE:CLNY), and Rogers Corporation (NYSE:ROG) to gather more data points. Our calculations also showed that GGAL isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In the financial world there are tons of signals shareholders put to use to evaluate publicly traded companies. A couple of the most underrated signals are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the top investment managers can outperform their index-focused peers by a solid margin (see the details here).
Crispin Odey of Odey Asset Management Group
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to go over the recent hedge fund action regarding Grupo Financiero Galicia S.A. (NASDAQ:GGAL).
What have hedge funds been doing with Grupo Financiero Galicia S.A. (NASDAQ:GGAL)?
Heading into the first quarter of 2020, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. By comparison, 19 hedge funds held shares or bullish call options in GGAL a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Grupo Financiero Galicia S.A. (NASDAQ:GGAL) was held by Odey Asset Management Group, which reported holding $9.6 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $8.3 million position. Other investors bullish on the company included D E Shaw, PEAK6 Capital Management, and Wildcat Capital Management. 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 1.01% of its 13F portfolio. Wildcat Capital Management is also relatively very bullish on the stock, setting aside 0.8 percent of its 13F equity portfolio to GGAL.
Because Grupo Financiero Galicia S.A. (NASDAQ:GGAL) has witnessed falling interest from hedge fund managers, we can see that there exists a select few funds that elected to cut their positions entirely in the third quarter. At the top of the heap, Bruce J. Richards and Louis Hanover’s Marathon Asset Management said goodbye to the largest investment of the 750 funds followed by Insider Monkey, worth close to $3.9 million in stock, and Benjamin A. Smith’s Laurion Capital Management was right behind this move, as the fund said goodbye to about $1.2 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks similar to Grupo Financiero Galicia S.A. (NASDAQ:GGAL). We will take a look at Banco Macro SA (NYSE:BMA), Colony Capital Inc (NYSE:CLNY), Rogers Corporation (NYSE:ROG), and Taylor Morrison Home Corp (NYSE:TMHC). This group of stocks’ market values are similar to GGAL’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BMA | 7 | 115618 | -5 |
| CLNY | 25 | 353690 | 3 |
| ROG | 21 | 63127 | 0 |
| TMHC | 28 | 458004 | 1 |
| Average | 20.25 | 247610 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $248 million. That figure was $30 million in GGAL’s case. Taylor Morrison Home Corp (NYSE:TMHC) is the most popular stock in this table. On the other hand Banco Macro SA (NYSE:BMA) is the least popular one with only 7 bullish hedge fund positions. Grupo Financiero Galicia S.A. (NASDAQ:GGAL) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately GGAL wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); GGAL investors were disappointed as the stock returned -56.8% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
