Is Gentherm Inc (NASDAQ:THRM) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Hedge fund interest in Gentherm Inc (NASDAQ:THRM) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare THRM to other stocks including Viad Corp (NYSE:VVI), CONSOL Energy Inc. (NYSE:CNX), and Bed Bath & Beyond Inc. (NASDAQ:BBBY) to get a better sense of its popularity.
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Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s check out the fresh hedge fund action surrounding Gentherm Inc (NASDAQ:THRM).
How have hedgies been trading Gentherm Inc (NASDAQ:THRM)?
At the end of the third quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in THRM over the last 17 quarters. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Trigran Investments, managed by Douglas T. Granat, holds the largest position in Gentherm Inc (NASDAQ:THRM). Trigran Investments has a $50.2 million position in the stock, comprising 9.5% of its 13F portfolio. The second most bullish fund manager is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $8.1 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other professional money managers that are bullish include Renaissance Technologies, Joel Greenblatt’s Gotham Asset Management and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Trigran Investments allocated the biggest weight to Gentherm Inc (NASDAQ:THRM), around 9.49% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, dishing out 0.45 percent of its 13F equity portfolio to THRM.
Since Gentherm Inc (NASDAQ:THRM) has faced a decline in interest from the smart money, we can see that there lies a certain “tier” of fund managers who sold off their entire stakes last quarter. At the top of the heap, Alec Litowitz and Ross Laser’s Magnetar Capital dropped the largest stake of the “upper crust” of funds followed by Insider Monkey, worth close to $0.9 million in stock. Mike Vranos’s fund, Ellington, also sold off its stock, about $0.3 million worth. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Gentherm Inc (NASDAQ:THRM) but similarly valued. These stocks are Viad Corp (NYSE:VVI), CONSOL Energy Inc. (NYSE:CNX), Bed Bath & Beyond Inc. (NASDAQ:BBBY), and Actuant Corporation (NYSE:ATU). This group of stocks’ market values are similar to THRM’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $264 million. That figure was $67 million in THRM’s case. Bed Bath & Beyond Inc. (NASDAQ:BBBY) is the most popular stock in this table. On the other hand Actuant Corporation (NYSE:ATU) is the least popular one with only 10 bullish hedge fund positions. Gentherm Inc (NASDAQ:THRM) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately THRM wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); THRM investors were disappointed as the stock returned 1.8% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.