Does GrafTech International Ltd. (NYSE:EAF) represent a good buying opportunity at the moment? Let’s briefly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail unconceivably on some occasions, but their stock picks have been generating superior risk-adjusted returns on average over the years.
Is GrafTech International Ltd. (NYSE:EAF) the right investment to pursue these days? Hedge funds are turning bullish. The number of bullish hedge fund bets rose by 12 recently. Our calculations also showed that EAF isn’t among the 30 most popular stocks among hedge funds.
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 market by 18 percentage points since May 2014 through December 3, 2018 (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’re going to review the new hedge fund action encompassing GrafTech International Ltd. (NYSE:EAF).
What have hedge funds been doing with GrafTech International Ltd. (NYSE:EAF)?
At the end of the third quarter, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of 63% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards EAF over the last 13 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in GrafTech International Ltd. (NYSE:EAF) was held by Indus Capital, which reported holding $92.5 million worth of stock at the end of September. It was followed by Millennium Management with a $40.7 million position. Other investors bullish on the company included Goodnow Investment Group, Marshall Wace LLP, and Columbus Circle Investors.
As aggregate interest increased, specific money managers were leading the bulls’ herd. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the most valuable position in GrafTech International Ltd. (NYSE:EAF). Marshall Wace LLP had $23 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $14.8 million position during the quarter. The other funds with brand new EAF positions are Rob Citrone’s Discovery Capital Management, Noam Gottesman’s GLG Partners, and Michael A. Price and Amos Meron’s Empyrean Capital Partners.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as GrafTech International Ltd. (NYSE:EAF) but similarly valued. These stocks are Gates Industrial Corporation plc (NYSE:GTES), American Campus Communities, Inc. (NYSE:ACC), Gardner Denver Holdings, Inc. (NYSE:GDI), and Antero Resources Corp (NYSE:AR). This group of stocks’ market valuations resemble EAF’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GTES | 9 | 21656 | 0 |
| ACC | 17 | 279758 | -2 |
| GDI | 24 | 371587 | -3 |
| AR | 20 | 1780131 | 4 |
| Average | 17.5 | 613283 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $613 million. That figure was $351 million in EAF’s case. Gardner Denver Holdings, Inc. (NYSE:GDI) is the most popular stock in this table. On the other hand Gates Industrial Corporation plc (NYSE:GTES) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks GrafTech International Ltd. (NYSE:EAF) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.