Is Granite Construction Incorporated (GVA) Going To Burn These Hedge Funds ?

We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Granite Construction Incorporated (NYSE:GVA).

Granite Construction Incorporated (NYSE:GVA) was in 11 hedge funds’ portfolios at the end of the second quarter of 2019. GVA has seen a decrease in enthusiasm from smart money in recent months. There were 15 hedge funds in our database with GVA positions at the end of the previous quarter. Our calculations also showed that GVA isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

To most stock holders, hedge funds are seen as worthless, outdated financial tools of yesteryear. While there are more than 8000 funds with their doors open at the moment, We hone in on the masters of this group, around 750 funds. Most estimates calculate that this group of people watch over most of the smart money’s total asset base, and by tracking their unrivaled stock picks, Insider Monkey has formulated a few investment strategies that have historically outstripped Mr. Market. Insider Monkey’s flagship hedge fund strategy outrun the S&P 500 index by around 5 percentage points annually since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .

Nelson Obus, Wynnefield Capital

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to go over the latest hedge fund action encompassing Granite Construction Incorporated (NYSE:GVA).

How have hedgies been trading Granite Construction Incorporated (NYSE:GVA)?

At the end of the second quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -27% from the first quarter of 2019. By comparison, 17 hedge funds held shares or bullish call options in GVA a year ago. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

No of Hedge Funds with GVA Positions

Among these funds, Royce & Associates held the most valuable stake in Granite Construction Incorporated (NYSE:GVA), which was worth $16.8 million at the end of the second quarter. On the second spot was Headlands Capital which amassed $12.6 million worth of shares. Moreover, Rutabaga Capital Management, Wynnefield Capital, and Millennium Management were also bullish on Granite Construction Incorporated (NYSE:GVA), allocating a large percentage of their portfolios to this stock.

Judging by the fact that Granite Construction Incorporated (NYSE:GVA) has witnessed a decline in interest from hedge fund managers, logic holds that there exists a select few fund managers who were dropping their full holdings heading into Q3. Interestingly, Matthew Tewksbury’s Stevens Capital Management sold off the biggest stake of the 750 funds monitored by Insider Monkey, comprising close to $1.2 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also sold off its stock, about $0.6 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 4 funds heading into Q3.

Let’s now review hedge fund activity in other stocks similar to Granite Construction Incorporated (NYSE:GVA). We will take a look at Harsco Corporation (NYSE:HSC), Franklin Electric Co., Inc. (NASDAQ:FELE), The RealReal, Inc. (NASDAQ:REAL), and Mednax Inc. (NYSE:MD). All of these stocks’ market caps are closest to GVA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HSC 18 137306 -1
FELE 14 224900 -1
REAL 33 101696 33
MD 18 269365 -5
Average 20.75 183317 6.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $183 million. That figure was $66 million in GVA’s case. The RealReal, Inc. (NASDAQ:REAL) is the most popular stock in this table. On the other hand Franklin Electric Co., Inc. (NASDAQ:FELE) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Granite Construction Incorporated (NYSE:GVA) is even less popular than FELE. Hedge funds dodged a bullet by taking a bearish stance towards GVA. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately GVA wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); GVA investors were disappointed as the stock returned -33% during the third 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 many of these stocks already outperformed the market so far in 2019.

Disclosure: None. This article was originally published at Insider Monkey.