“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Group 1 Automotive, Inc. (NYSE:GPI).
Group 1 Automotive, Inc. (NYSE:GPI) investors should pay attention to an increase in hedge fund sentiment recently. GPI was in 20 hedge funds’ portfolios at the end of the third quarter of 2019. There were 13 hedge funds in our database with GPI positions at the end of the previous quarter. Our calculations also showed that GPI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
If you’d ask most stock holders, hedge funds are perceived as worthless, old investment tools of years past. While there are more than 8000 funds trading at the moment, Our experts choose to focus on the crème de la crème of this group, about 750 funds. These investment experts handle the majority of all hedge funds’ total asset base, and by keeping an eye on their first-class investments, Insider Monkey has figured out a number of investment strategies that have historically beaten the market. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Ricky Sandler of Eminence Capital
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to check out the recent hedge fund action surrounding Group 1 Automotive, Inc. (NYSE:GPI).
What have hedge funds been doing with Group 1 Automotive, Inc. (NYSE:GPI)?
Heading into the fourth quarter of 2019, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 54% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards GPI over the last 17 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Group 1 Automotive, Inc. (NYSE:GPI) was held by Eminence Capital, which reported holding $89.8 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $21.5 million position. Other investors bullish on the company included Marshall Wace, Citadel Investment Group, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Eminence Capital allocated the biggest weight to Group 1 Automotive, Inc. (NYSE:GPI), around 1.08% of its 13F portfolio. Factorial Partners is also relatively very bullish on the stock, dishing out 0.58 percent of its 13F equity portfolio to GPI.
As one would reasonably expect, key hedge funds were leading the bulls’ herd. Renaissance Technologies established the largest position in Group 1 Automotive, Inc. (NYSE:GPI). Renaissance Technologies had $8.6 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also initiated a $3.7 million position during the quarter. The other funds with new positions in the stock are George McCabe’s Portolan Capital Management, Peter Muller’s PDT Partners, and Brandon Haley’s Holocene Advisors.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Group 1 Automotive, Inc. (NYSE:GPI) but similarly valued. We will take a look at Skyline Champion Corporation (NYSE:SKY), Fanhua Inc. (NASDAQ:FANH), Enerplus Corporation (NYSE:ERF), and SPS Commerce, Inc. (NASDAQ:SPSC). This group of stocks’ market values are closest to GPI’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SKY | 25 | 283836 | 0 |
| FANH | 8 | 16703 | -1 |
| ERF | 15 | 155867 | 3 |
| SPSC | 17 | 142840 | -1 |
| Average | 16.25 | 149812 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $150 million. That figure was $171 million in GPI’s case. SSkyline Champion Corporation (NYSE:SKY) is the most popular stock in this table. On the other hand Fanhua Inc. (NASDAQ:FANH) is the least popular one with only 8 bullish hedge fund positions. Group 1 Automotive, Inc. (NYSE:GPI) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on GPI as the stock returned 12% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
