Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Gibraltar Industries Inc (NASDAQ:ROCK) based on that data.
Gibraltar Industries Inc (NASDAQ:ROCK) investors should be aware of a decrease in support from the world’s most elite money managers lately. ROCK was in 19 hedge funds’ portfolios at the end of March. There were 23 hedge funds in our database with ROCK holdings at the end of the previous quarter. Our calculations also showed that ROCK isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 S&P 500 ETFs by more than 58 percentage points since March 2017 (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 stocks that are in our short portfolio.
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. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a look at the new hedge fund action surrounding Gibraltar Industries Inc (NASDAQ:ROCK).
How have hedgies been trading Gibraltar Industries Inc (NASDAQ:ROCK)?
At the end of the first quarter, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from the fourth quarter of 2019. On the other hand, there were a total of 14 hedge funds with a bullish position in ROCK a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
The largest stake in Gibraltar Industries Inc (NASDAQ:ROCK) was held by Renaissance Technologies, which reported holding $26.9 million worth of stock at the end of September. It was followed by D E Shaw with a $12.9 million position. Other investors bullish on the company included Driehaus Capital, Royce & Associates, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Diametric Capital allocated the biggest weight to Gibraltar Industries Inc (NASDAQ:ROCK), around 2.2% of its 13F portfolio. Driehaus Capital is also relatively very bullish on the stock, designating 0.4 percent of its 13F equity portfolio to ROCK.
Because Gibraltar Industries Inc (NASDAQ:ROCK) has witnessed bearish sentiment from the smart money, we can see that there lies a certain “tier” of hedgies who were dropping their entire stakes heading into Q4. At the top of the heap, Richard S. Pzena’s Pzena Investment Management cut the biggest position of the 750 funds monitored by Insider Monkey, valued at about $11 million in stock, and Michael Gelband’s ExodusPoint Capital was right behind this move, as the fund said goodbye to about $1.2 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 4 funds heading into Q4.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Gibraltar Industries Inc (NASDAQ:ROCK) but similarly valued. These stocks are Cimpress plc (NASDAQ:CMPR), Ryder System, Inc. (NYSE:R), Mack Cali Realty Corp (NYSE:CLI), and Meritage Homes Corp (NYSE:MTH). This group of stocks’ market valuations resemble ROCK’s market valuation.
|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 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $164 million. That figure was $104 million in ROCK’s case. Meritage Homes Corp (NYSE:MTH) is the most popular stock in this table. On the other hand Mack Cali Realty Corp (NYSE:CLI) is the least popular one with only 10 bullish hedge fund positions. Gibraltar Industries Inc (NASDAQ:ROCK) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd but beat the market by 15.9 percentage points. Unfortunately ROCK wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ROCK were disappointed as the stock returned 9.2% 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.