The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 817 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of September 30th, 2020. In this article we are going to take a look at smart money sentiment towards GP Strategies Corporation (NYSE:GPX).
Is GPX a good stock to buy now? Investors who are in the know were selling. The number of bullish hedge fund positions went down by 2 lately. GP Strategies Corporation (NYSE:GPX) was in 9 hedge funds’ portfolios at the end of September. The all time high for this statistics is 14. Our calculations also showed that GPX isn’t among the 30 most popular stocks among hedge funds (click for Q3 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 66 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.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we’re going to view the recent hedge fund action encompassing GP Strategies Corporation (NYSE:GPX).
Do Hedge Funds Think GPX Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards GPX over the last 21 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
Among these funds, Cove Street Capital held the most valuable stake in GP Strategies Corporation (NYSE:GPX), which was worth $24.9 million at the end of the third quarter. On the second spot was Royce & Associates which amassed $12.1 million worth of shares. Rutabaga Capital Management, Engine Capital, and Minerva Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Cove Street Capital allocated the biggest weight to GP Strategies Corporation (NYSE:GPX), around 4.72% of its 13F portfolio. Rutabaga Capital Management is also relatively very bullish on the stock, setting aside 2.3 percent of its 13F equity portfolio to GPX.
Due to the fact that GP Strategies Corporation (NYSE:GPX) has faced a decline in interest from the entirety of the hedge funds we track, we can see that there is a sect of fund managers who were dropping their positions entirely heading into Q4. It’s worth mentioning that John Overdeck and David Siegel’s Two Sigma Advisors dumped the largest stake of the “upper crust” of funds followed by Insider Monkey, comprising an estimated $0.2 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund sold off about $0.2 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 2 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as GP Strategies Corporation (NYSE:GPX) but similarly valued. These stocks are National Bankshares Inc. (NASDAQ:NKSH), Jiayin Group Inc. (NASDAQ:JFIN), Sesen Bio, Inc. (NASDAQ:SESN), Big 5 Sporting Goods Corporation (NASDAQ:BGFV), Irsa Inversiones y Rprsntcins SA (NYSE:IRS), Aquestive Therapeutics, Inc. (NASDAQ:AQST), and Quad/Graphics, Inc. (NYSE:QUAD). This group of stocks’ market values match GPX’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 5.7 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $49 million in GPX’s case. Big 5 Sporting Goods Corporation (NASDAQ:BGFV) is the most popular stock in this table. On the other hand Jiayin Group Inc. (NASDAQ:JFIN) is the least popular one with only 1 bullish hedge fund positions. GP Strategies Corporation (NYSE:GPX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GPX is 72.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on GPX as the stock returned 33.8% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.