Is GTES A Good Stock To Buy Now?

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 817 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Gates Industrial Corporation plc (NYSE:GTES), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Gates Industrial Corporation plc (NYSE:GTES) investors should pay attention to an increase in activity from the world’s largest hedge funds lately. Gates Industrial Corporation plc (NYSE:GTES) was in 14 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 15. Our calculations also showed that GTES 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.

In the financial world there are many gauges shareholders employ to appraise publicly traded companies. Some of the less known gauges are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the best picks of the elite money managers can outclass the S&P 500 by a healthy amount (see the details here).

Phill Gross Adage Capital Phillip Gross

Phillip Gross of Adage Capital

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. Keeping this in mind let’s take a glance at the key hedge fund action regarding Gates Industrial Corporation plc (NYSE:GTES).

Do Hedge Funds Think GTES Is A Good Stock To Buy Now?

At third quarter’s end, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 40% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GTES over the last 21 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

The largest stake in Gates Industrial Corporation plc (NYSE:GTES) was held by Adage Capital Management, which reported holding $26.9 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $3.2 million position. Other investors bullish on the company included Intrinsic Edge Capital, Impax Asset Management, and Millennium Management. In terms of the portfolio weights assigned to each position Intrinsic Edge Capital allocated the biggest weight to Gates Industrial Corporation plc (NYSE:GTES), around 0.21% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, earmarking 0.08 percent of its 13F equity portfolio to GTES.

With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the most outsized position in Gates Industrial Corporation plc (NYSE:GTES). Arrowstreet Capital had $3.2 million invested in the company at the end of the quarter. Mark Coe’s Intrinsic Edge Capital also made a $3.1 million investment in the stock during the quarter. The following funds were also among the new GTES investors: Renaissance Technologies, Karim Abbadi and Edward McBride’s Centiva Capital, and Minhua Zhang’s Weld Capital Management.

Let’s now review hedge fund activity in other stocks similar to Gates Industrial Corporation plc (NYSE:GTES). We will take a look at Marathon Oil Corporation (NYSE:MRO), Blackstone Mortgage Trust Inc (NYSE:BXMT), Quaker Chemical Corp (NYSE:KWR), HollyFrontier Corporation (NYSE:HFC), Omnicell, Inc. (NASDAQ:OMCL), Taylor Morrison Home Corp (NYSE:TMHC), and Western Alliance Bancorporation (NYSE:WAL). This group of stocks’ market caps resemble GTES’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MRO 16 140827 -10
BXMT 24 138471 0
KWR 16 141709 3
HFC 28 265738 1
OMCL 22 116470 6
TMHC 35 311698 2
WAL 28 125862 4
Average 24.1 177254 0.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.1 hedge funds with bullish positions and the average amount invested in these stocks was $177 million. That figure was $43 million in GTES’s case. Taylor Morrison Home Corp (NYSE:TMHC) is the most popular stock in this table. On the other hand Marathon Oil Corporation (NYSE:MRO) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Gates Industrial Corporation plc (NYSE:GTES) is even less popular than MRO. Our overall hedge fund sentiment score for GTES is 37. 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. Hedge funds clearly dropped the ball on GTES as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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. A small number of hedge funds were also right about betting on GTES as the stock returned 19.2% since Q3 (through December 8th) and outperformed the market by an even larger margin.

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