Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Micron and Anadarko Petroleum, have not done well during the last 12 months ending in October due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average. The top 30 S&P 500 stocks among hedge funds at the end of September 2014 yielded an average return of 9.5% during the last four quarters ending in October and sixty three percent of these 30 stocks outperformed the market. S&P 500 Index returned only 5.2% during the same period and less than 49% of its constituents managed to beat this return. 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:GMT) from the perspective of those elite funds.
Is GATX Corporation (NYSE:GMT) a safe investment now? Money managers are turning less bullish. The number of bullish hedge fund positions shrunk by 3 lately. 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 Balchem Corporation (NASDAQ:BCPC), AllianceBernstein Income Fund Inc. (NYSE:ACG), and Alexander’s, Inc. (NYSE:ALX) to gather more data points.
In the eyes of most shareholders, hedge funds are seen as worthless, old investment tools of yesteryear. While there are over 8000 funds trading today, We look at the bigwigs of this group, around 700 funds. It is estimated that this group of investors shepherd most of the hedge fund industry’s total asset base, and by watching their matchless picks, Insider Monkey has deciphered numerous investment strategies that have historically outpaced Mr. Market. Insider Monkey’s small-cap hedge fund strategy exceeded the S&P 500 index by 12 percentage points annually for a decade in their back tests.
Keeping this in mind, let’s take a gander at the fresh action encompassing GATX Corporation (NYSE:GMT).
What does the smart money think about GATX Corporation (NYSE:GMT)?
At Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a drop of 18% from the second quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Mario Gabelli’s GAMCO Investors has the most valuable position in GATX Corporation (NYSE:GMT), worth close to $140.1 million, amounting to 0.9% of its total 13F portfolio. Coming in second is Skylands Capital, led by Charles Paquelet, holding a $17.6 million position; the fund has 2.4% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism consist of Matt Sirovich and Jeremy Mindich’s Scopia Capital, Bill Miller’s Legg Mason Capital Management and Cliff Asness’s AQR Capital Management.
Since GATX Corporation (NYSE:GMT) has witnessed declining sentiment from the smart money, logic holds that there is a sect of funds that decided to sell off their full holdings by the end of the third quarter. Interestingly, Chuck Royce’s Royce & Associates said goodbye to the largest position of the 700 funds tracked by Insider Monkey, comprising close to $1.7 million in stock. Matthew Tewksbury’s fund, Stevens Capital Management, also said goodbye to its stock, about $0.8 million worth of shares. These bearish behaviors are important to note, as total hedge fund interest was cut by 3 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks similar to GATX Corporation (NYSE:GMT). We will take a look at Balchem Corporation (NASDAQ:BCPC), AllianceBernstein Income Fund Inc. (NYSE:ACG), Alexander’s, Inc. (NYSE:ALX), and SUPERVALU INC. (NYSE:SVU). This group of stocks’ market values are closest to GMT’s market value.
|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 14 hedge funds with bullish positions and the average amount invested in these stocks was $149 million. That figure was $188 million in GMT’s case. SUPERVALU INC. (NYSE:SVU) is the most popular stock in this table. On the other hand Alexander’s, Inc. (NYSE:ALX) is the least popular one with only 5 bullish hedge fund positions. GATX Corporation (NYSE:GMT) is not the least popular stock in this group, but hedge fund interest is average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard SVU might be a better candidate to consider a long position.