Were Hedge Funds Right About Flocking Into Quad/Graphics, Inc. (QUAD) ?

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Quad/Graphics, Inc. (NYSE:QUAD).

Quad/Graphics, Inc. (NYSE:QUAD) was in 22 hedge funds’ portfolios at the end of March. QUAD has seen an increase in support from the world’s most elite money managers recently. There were 20 hedge funds in our database with QUAD positions at the end of the previous quarter. Our calculations also showed that quad isn’t among the 30 most popular stocks among hedge funds.

In the eyes of most market participants, hedge funds are perceived as worthless, old investment vehicles of the past. While there are over 8000 funds in operation at the moment, Our researchers look at the top tier of this group, about 750 funds. These hedge fund managers control the majority of all hedge funds’ total asset base, and by watching their inimitable equity investments, Insider Monkey has unsheathed a number of investment strategies that have historically beaten the S&P 500 index. Insider Monkey’s flagship hedge fund strategy defeated the S&P 500 index by around 5 percentage points annually since its inception in May 2014 through the end of May. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 30.9% since February 2017 (through May 30th) even though the market was up nearly 24% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 11.9% in less than a couple of weeks whereas our long picks outperformed the market by 2 percentage points in this volatile 2 week period.

Paul Glazer of Glazer Capital

Let’s take a peek at the recent hedge fund action surrounding Quad/Graphics, Inc. (NYSE:QUAD).

How have hedgies been trading Quad/Graphics, Inc. (NYSE:QUAD)?

At the end of the first quarter, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from one quarter earlier. By comparison, 17 hedge funds held shares or bullish call options in QUAD a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with QUAD Positions

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Noam Gottesman’s GLG Partners has the most valuable position in Quad/Graphics, Inc. (NYSE:QUAD), worth close to $9.9 million, comprising less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is Glazer Capital, managed by Paul Glazer, which holds a $4.3 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism contain Ken Griffin’s Citadel Investment Group, Jim Simons’s Renaissance Technologies and Andrew Weiss’s Weiss Asset Management.

Consequently, specific money managers were leading the bulls’ herd. Weiss Asset Management, managed by Andrew Weiss, initiated the biggest position in Quad/Graphics, Inc. (NYSE:QUAD). Weiss Asset Management had $2.7 million invested in the company at the end of the quarter. Shane Finemore’s Manikay Partners also made a $2.2 million investment in the stock during the quarter. The other funds with brand new QUAD positions are Joel Greenblatt’s Gotham Asset Management, Mike Vranos’s Ellington, and Ken Griffin’s Citadel Investment Group.

Let’s go over hedge fund activity in other stocks similar to Quad/Graphics, Inc. (NYSE:QUAD). We will take a look at Peoples Bancorp Inc. (NASDAQ:PEBO), LeMaitre Vascular Inc (NASDAQ:LMAT), Exterran Corporation (NYSE:EXTN), and Partner Communications Company Ltd (NASDAQ:PTNR). This group of stocks’ market valuations resemble QUAD’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PEBO 9 29859 1
LMAT 11 17414 5
EXTN 18 70361 3
PTNR 2 10140 0
Average 10 31944 2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $32 million. That figure was $39 million in QUAD’s case. Exterran Corporation (NYSE:EXTN) is the most popular stock in this table. On the other hand Partner Communications Company Ltd (NASDAQ:PTNR) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Quad/Graphics, Inc. (NYSE:QUAD) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately QUAD wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on QUAD were disappointed as the stock returned -25.6% during the same period 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 13 of these stocks already outperformed the market in Q2.

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