Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average over the long-term. The top 15 S&P 500 stocks among hedge funds at the end of September 2018 returned an average of 1% through March 15th whereas the S&P 500 Index ETF lost 2.2% during the same period. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at GATX Corporation (NYSE:GATX) from the perspective of those elite funds.
GATX Corporation (NYSE:GATX) was in 14 hedge funds’ portfolios at the end of the fourth quarter of 2018. GATX investors should be aware of an increase in hedge fund sentiment recently. There were 11 hedge funds in our database with GATX holdings at the end of the previous quarter. Our calculations also showed that gatx isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let’s take a gander at the key hedge fund action surrounding GATX Corporation (NYSE:GATX).
How are hedge funds trading GATX Corporation (NYSE:GATX)?
At Q4’s end, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 27% from the previous quarter. On the other hand, there were a total of 9 hedge funds with a bullish position in GATX 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.
Among these funds, GAMCO Investors held the most valuable stake in GATX Corporation (NYSE:GATX), which was worth $163.8 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $30 million worth of shares. Moreover, Winton Capital Management, D E Shaw, and Citadel Investment Group were also bullish on GATX Corporation (NYSE:GATX), allocating a large percentage of their portfolios to this stock.
Now, key money managers have been driving this bullishness. Holocene Advisors, managed by Brandon Haley, created the most outsized position in GATX Corporation (NYSE:GATX). Holocene Advisors had $1.9 million invested in the company at the end of the quarter. Ray Dalio’s Bridgewater Associates also made a $0.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Michael Platt and William Reeves’s BlueCrest Capital Mgmt. and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as GATX Corporation (NYSE:GATX) but similarly valued. These stocks are Columbia Banking System Inc (NASDAQ:COLB), AMN Healthcare Services Inc (NYSE:AMN), Ormat Technologies, Inc. (NYSE:ORA), and Guangshen Railway Co. Ltd (NYSE:GSH). This group of stocks’ market valuations are similar to GATX’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $84 million. That figure was $221 million in GATX’s case. AMN Healthcare Services Inc (NYSE:AMN) is the most popular stock in this table. On the other hand Guangshen Railway Co. Ltd (NYSE:GSH) is the least popular one with only 1 bullish hedge fund positions. GATX Corporation (NYSE:GATX) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately GATX wasn’t nearly as popular as these 15 stock and hedge funds that were betting on GATX were disappointed as the stock returned 9.7% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.