The worries about the election and the ongoing uncertainty about the path of interest-rate increases have been keeping investors on the sidelines. Of course, most hedge funds and other asset managers have been underperforming main stock market indices since the middle of 2015. Interestingly though, smaller-cap stocks registered their best performance relative to the large-capitalization stocks since the end of the June quarter, suggesting that this may be the best time to take a cue from their stock picks. In fact, the Russell 2000 Index gained more than 15% since the beginning of the third quarter, while the Standard and Poor’s 500 benchmark returned less than 6%. This article will lay out and discuss the hedge fund and institutional investor sentiment towards W.R. Grace & Co. (NYSE:GRA).
Is W.R. Grace & Co. (NYSE:GRA) a bargain? Investors who are in the know are getting less optimistic. The number of long hedge fund bets decreased by 8 recently. GRA was in 39 hedge funds’ portfolios at the end of September. There were 47 hedge funds in our database with GRA positions at the end of the previous quarter. At the end of this article we will also compare GRA to other stocks including WABCO Holdings Inc. (NYSE:WBC), Casey’s General Stores, Inc. (NASDAQ:CASY), and The Hain Celestial Group, Inc. (NASDAQ:HAIN) to get a better sense of its popularity.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
Keeping this in mind, we’re going to go over the recent action regarding W.R. Grace & Co. (NYSE:GRA).
What does the smart money think about W.R. Grace & Co. (NYSE:GRA)?
At Q3’s end, a total of 39 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the previous quarter. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, David Cohen and Harold Levy’s Iridian Asset Management has the biggest position in W.R. Grace & Co. (NYSE:GRA), worth close to $315.6 million, amounting to 2.8% of its total 13F portfolio. Sitting at the No. 2 spot is John Griffin of Blue Ridge Capital, with a $233.3 million position; the fund has 2.8% of its 13F portfolio invested in the stock. Some other peers that are bullish comprise Phill Gross and Robert Atchinson’s Adage Capital Management, John Lykouretzos’s Hoplite Capital Management and D. E. Shaw’s D E Shaw.
Seeing as W.R. Grace & Co. (NYSE:GRA) has witnessed declining sentiment from hedge fund managers, we can see that there were a few hedgies who sold off their entire stakes in the third quarter. At the top of the heap, Jean-Marie Eveillard’s First Eagle Investment Management dropped the largest investment of all the hedgies tracked by Insider Monkey, valued at about $82.2 million in stock. Rob Citrone’s fund, Discovery Capital Management, also sold off its stock, about $14.2 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 8 funds in the third quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as W.R. Grace & Co. (NYSE:GRA) but similarly valued. We will take a look at WABCO Holdings Inc. (NYSE:WBC), Casey’s General Stores, Inc. (NASDAQ:CASY), The Hain Celestial Group, Inc. (NASDAQ:HAIN), and Highwoods Properties Inc (NYSE:HIW). This group of stocks’ market valuations are closest to GRA’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $594 million. That figure was $1.32 billion in GRA’s case. WABCO Holdings Inc. (NYSE:WBC) is the most popular stock in this table. On the other hand Highwoods Properties Inc (NYSE:HIW) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks W.R. Grace & Co. (NYSE:GRA) 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.