Now We Know Why Garrett Motion Inc. (GTX) Crashed In March

In this article we will check out the progression of hedge fund sentiment towards Garrett Motion Inc. (NYSE:GTX) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Garrett Motion Inc. (NYSE:GTX) investors should pay attention to a decrease in support from the world’s most elite money managers lately. GTX was in 21 hedge funds’ portfolios at the end of March. There were 38 hedge funds in our database with GTX positions at the end of the previous quarter. Our calculations also showed that GTX isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

Today there are plenty of gauges market participants put to use to analyze publicly traded companies. Some of the best gauges are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the best picks of the top investment managers can outperform the broader indices by a solid margin (see the details here).

John Petry Sessa Capital

John Petry of Sessa Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a look at the latest hedge fund action regarding Garrett Motion Inc. (NYSE:GTX).

What have hedge funds been doing with Garrett Motion Inc. (NYSE:GTX)?

Heading into the second quarter of 2020, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of -45% from the previous quarter. On the other hand, there were a total of 19 hedge funds with a bullish position in GTX a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

Among these funds, Deccan Value Advisors held the most valuable stake in Garrett Motion Inc. (NYSE:GTX), which was worth $30.1 million at the end of the third quarter. On the second spot was Sessa Capital which amassed $20.9 million worth of shares. Newtyn Management, Kingstown Capital Management, and Hawk Ridge 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 Newtyn Management allocated the biggest weight to Garrett Motion Inc. (NYSE:GTX), around 3.69% of its 13F portfolio. Solas Capital Management is also relatively very bullish on the stock, designating 3.1 percent of its 13F equity portfolio to GTX.

Since Garrett Motion Inc. (NYSE:GTX) has witnessed falling interest from hedge fund managers, it’s safe to say that there lies a certain “tier” of hedgies who were dropping their full holdings in the first quarter. Interestingly, Steven Tananbaum’s GoldenTree Asset Management dropped the largest position of the 750 funds monitored by Insider Monkey, comprising close to $12 million in stock, and Mark Travis’s Intrepid Capital Management was right behind this move, as the fund dumped about $3.8 million worth. These transactions are interesting, as total hedge fund interest dropped by 17 funds in the first quarter.

Let’s go over hedge fund activity in other stocks similar to Garrett Motion Inc. (NYSE:GTX). These stocks are Unifi, Inc. (NYSE:UFI), Aesthetic Medical International Holdings Group Ltd. (NASDAQ:AIH), Nam Tai Property Inc (NYSE:NTP), and Veru Inc. (NASDAQ:VERU). This group of stocks’ market caps match GTX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
UFI 14 47158 0
AIH 1 525 1
NTP 6 38517 -2
VERU 8 12593 1
Average 7.25 24698 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $25 million. That figure was $82 million in GTX’s case. Unifi, Inc. (NYSE:UFI) is the most popular stock in this table. On the other hand Aesthetic Medical International Holdings Group Ltd. (NASDAQ:AIH) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Garrett Motion Inc. (NYSE:GTX) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 12.2% in 2020 through June 17th but still managed to beat the market by 14.8 percentage points. Hedge funds were also right about betting on GTX as the stock returned 76.9% so far in Q2 (through June 17th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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