We at Insider Monkey have gone over 752 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. In this article, we look at what those funds think of Graf Industrial Corp. (NYSE:GRAF) based on that data.
Graf Industrial Corp. (NYSE:GRAF) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 12 hedge funds’ portfolios at the end of the third quarter of 2019. 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 Tribune Publishing Company (NASDAQ:TPCO), Great Ajax Corp (NYSE:AJX), and Nathan’s Famous, Inc. (NASDAQ:NATH) to gather more data points. Our calculations also showed that GRAF isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Nathaniel August of Mangrove Partners
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 go over the key hedge fund action encompassing Graf Industrial Corp. (NYSE:GRAF).
What does smart money think about Graf Industrial Corp. (NYSE:GRAF)?
At Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GRAF over the last 17 quarters. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
Among these funds, Magnetar Capital held the most valuable stake in Graf Industrial Corp. (NYSE:GRAF), which was worth $25.4 million at the end of the third quarter. On the second spot was Mangrove Partners which amassed $8.6 million worth of shares. Fort Baker Capital Management, Glazer Capital, and Vertex One Asset Management 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 Fort Baker Capital Management allocated the biggest weight to Graf Industrial Corp. (NYSE:GRAF), around 3.8% of its 13F portfolio. Mangrove Partners is also relatively very bullish on the stock, dishing out 1.04 percent of its 13F equity portfolio to GRAF.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Graf Industrial Corp. (NYSE:GRAF) but similarly valued. These stocks are Tribune Publishing Company (NASDAQ:TPCO), Great Ajax Corp (NYSE:AJX), Nathan’s Famous, Inc. (NASDAQ:NATH), and Irsa Inversiones y Rprsntcins SA (NYSE:IRS). This group of stocks’ market valuations match GRAF’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TPCO | 15 | 14906 | 2 |
| AJX | 8 | 18528 | 0 |
| NATH | 4 | 39575 | -2 |
| IRS | 10 | 23583 | 4 |
| Average | 9.25 | 24148 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.25 hedge funds with bullish positions and the average amount invested in these stocks was $24 million. That figure was $54 million in GRAF’s case. Tribune Publishing Company (NASDAQ:TPCO) is the most popular stock in this table. On the other hand Nathan’s Famous, Inc. (NASDAQ:NATH) is the least popular one with only 4 bullish hedge fund positions. Graf Industrial Corp. (NYSE:GRAF) 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 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 GRAF wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on GRAF were disappointed as the stock returned 0.2% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.