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Were Hedge Funds Right About Buying Griffon Corporation (GFF)?

Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average over the long-term. The top 20 stocks among hedge funds beat the S&P 500 Index ETF by 4 percentage points so far this year. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Griffon Corporation (NYSE:GFF) from the perspective of those elite funds.

Is Griffon Corporation (NYSE:GFF) going to take off soon? Investors who are in the know are turning bullish. The number of bullish hedge fund bets went up by 2 recently. Our calculations also showed that GFF isn’t among the 30 most popular stocks among hedge funds (see the video below). GFF was in 9 hedge funds’ portfolios at the end of the second quarter of 2019. There were 7 hedge funds in our database with GFF positions at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

GFF_oct2019

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 review the recent hedge fund action encompassing Griffon Corporation (NYSE:GFF).

How have hedgies been trading Griffon Corporation (NYSE:GFF)?

At Q2’s end, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 29% from the first quarter of 2019. By comparison, 13 hedge funds held shares or bullish call options in GFF a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

GAMCO Investors, Mario Gabelli

Of the funds tracked by Insider Monkey, Mario Gabelli’s GAMCO Investors has the most valuable position in Griffon Corporation (NYSE:GFF), worth close to $91.4 million, corresponding to 0.7% of its total 13F portfolio. The second most bullish fund manager is Royce & Associates, led by Chuck Royce, holding a $13.4 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other peers that hold long positions encompass Ken Griffin’s Citadel Investment Group, Renaissance Technologies and D. E. Shaw’s D E Shaw.

With a general bullishness amongst the heavyweights, key money managers have jumped into Griffon Corporation (NYSE:GFF) headfirst. Citadel Investment Group, managed by Ken Griffin, created the most valuable position in Griffon Corporation (NYSE:GFF). Citadel Investment Group had $2.8 million invested in the company at the end of the quarter. Alec Litowitz and Ross Laser’s Magnetar Capital also initiated a $0.6 million position during the quarter. The following funds were also among the new GFF investors: Jonathan Soros’s JS Capital and Minhua Zhang’s Weld Capital Management.

Let’s check out hedge fund activity in other stocks similar to Griffon Corporation (NYSE:GFF). These stocks are Celestica Inc. (NYSE:CLS), CorePoint Lodging Inc. (NYSE:CPLG), Krystal Biotech, Inc. (NASDAQ:KRYS), and Foundation Building Materials, Inc. (NYSE:FBM). This group of stocks’ market valuations are closest to GFF’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CLS 12 61125 -3
CPLG 8 16070 -5
KRYS 12 190349 -4
FBM 10 27347 2
Average 10.5 73723 -2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $74 million. That figure was $113 million in GFF’s case. Celestica Inc. (NYSE:CLS) is the most popular stock in this table. On the other hand CorePoint Lodging Inc. (NYSE:CPLG) is the least popular one with only 8 bullish hedge fund positions. Griffon Corporation (NYSE:GFF) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on GFF as the stock returned 24.4% during the same time frame and outperformed the market by an even larger margin.

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

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