How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Gartner Inc (NYSE:IT).
Gartner Inc (NYSE:IT) was in 33 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 40. IT has experienced a decrease in support from the world’s most elite money managers of late. There were 39 hedge funds in our database with IT positions at the end of the second quarter. Our calculations also showed that IT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we’re going to review the recent hedge fund action encompassing Gartner Inc (NYSE:IT).
Do Hedge Funds Think IT Is A Good Stock To Buy Now?
At third quarter’s end, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of -15% from the previous quarter. On the other hand, there were a total of 38 hedge funds with a bullish position in IT a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
Among these funds, Generation Investment Management held the most valuable stake in Gartner Inc (NYSE:IT), which was worth $856.9 million at the end of the third quarter. On the second spot was Alkeon Capital Management which amassed $371.6 million worth of shares. Melvin Capital Management, Citadel Investment Group, and Arrowstreet Capital 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 Goodnow Investment Group allocated the biggest weight to Gartner Inc (NYSE:IT), around 4.37% of its 13F portfolio. Generation Investment Management is also relatively very bullish on the stock, setting aside 3.56 percent of its 13F equity portfolio to IT.
Because Gartner Inc (NYSE:IT) has experienced declining sentiment from the entirety of the hedge funds we track, we can see that there exists a select few hedgies who were dropping their positions entirely heading into Q4. At the top of the heap, Gabriel Plotkin’s Melvin Capital Management dumped the biggest position of all the hedgies tracked by Insider Monkey, comprising an estimated $121.1 million in stock, and Jack Woodruff’s Candlestick Capital Management was right behind this move, as the fund dumped about $109 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 6 funds heading into Q4.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Gartner Inc (NYSE:IT) but similarly valued. These stocks are United Rentals, Inc. (NYSE:URI), ZTO Express (Cayman) Inc. (NYSE:ZTO), Bilibili Inc. (NASDAQ:BILI), Fortive Corporation (NYSE:FTV), Realty Income Corporation (NYSE:O), Coca-Cola European Partners plc (NYSE:CCEP), and PT Telekomunikasi Indonesia (NYSE:TLK). This group of stocks’ market values resemble IT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| URI | 37 | 1382415 | -10 |
| ZTO | 20 | 1019859 | -1 |
| BILI | 35 | 1509730 | -12 |
| FTV | 32 | 2130115 | 1 |
| O | 22 | 275031 | -1 |
| CCEP | 32 | 1192664 | 1 |
| TLK | 4 | 170252 | -1 |
| Average | 26 | 1097152 | -3.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $1097 million. That figure was $2040 million in IT’s case. United Rentals, Inc. (NYSE:URI) is the most popular stock in this table. On the other hand PT Telekomunikasi Indonesia (NYSE:TLK) is the least popular one with only 4 bullish hedge fund positions. Gartner Inc (NYSE:IT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for IT is 67.7. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately IT wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on IT were disappointed as the stock returned 2.8% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow Gartner Inc (NYSE:IT)
Follow Gartner Inc (NYSE:IT)
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Disclosure: None. This article was originally published at Insider Monkey.
