Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients' money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth also depends on it. Regardless of the various methods used by elite investors like David Tepper and David Abrams, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space. Nevertheless, it is also possible to identify cheap large cap stocks by following the footsteps of best performing hedge funds.
Genuine Parts Company (NYSE:GPC) was in 20 hedge funds' portfolios at the end of the second quarter of 2019. GPC investors should pay attention to a decrease in activity from the world's largest hedge funds recently. There were 22 hedge funds in our database with GPC holdings at the end of the previous quarter. Our calculations also showed that GPC isn't among the 30 most popular stocks among hedge funds.
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.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, 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 take a gander at the fresh hedge fund action surrounding Genuine Parts Company (NYSE:GPC).
How have hedgies been trading Genuine Parts Company (NYSE:GPC)?
At Q2's end, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in GPC over the last 16 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, GAMCO Investors, managed by Mario Gabelli, holds the largest position in Genuine Parts Company (NYSE:GPC). GAMCO Investors has a $136.5 million position in the stock, comprising 1% of its 13F portfolio. The second largest stake is held by Millennium Management, managed by Israel Englander, which holds a $57.3 million position; 0.1% of its 13F portfolio is allocated to the stock. Other peers that hold long positions contain Renaissance Technologies, D. E. Shaw's D E Shaw and Noam Gottesman's GLG Partners.
Since Genuine Parts Company (NYSE:GPC) has experienced declining sentiment from the aggregate hedge fund industry, we can see that there lies a certain "tier" of fund managers who were dropping their full holdings heading into Q3. It's worth mentioning that Joel Greenblatt's Gotham Asset Management cut the largest stake of the 750 funds followed by Insider Monkey, valued at about $21.1 million in stock, and Bruce Kovner's Caxton Associates LP was right behind this move, as the fund sold off about $8 million worth. These moves are interesting, as total hedge fund interest was cut by 2 funds heading into Q3.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Genuine Parts Company (NYSE:GPC) but similarly valued. We will take a look at Sasol Limited (NYSE:SSL), Tenaris S.A. (NYSE:TS), International Flavors & Fragrances Inc (NYSE:IFF), and Broadridge Financial Solutions, Inc. (NYSE:BR). This group of stocks' market caps resemble GPC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SSL,8,19687,3 TS,16,657304,1 IFF,18,222801,2 BR,21,254023,-5 Average,15.75,288454,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $288 million. That figure was $316 million in GPC's case. Broadridge Financial Solutions, Inc. (NYSE:BR) is the most popular stock in this table. On the other hand Sasol Limited (NYSE:SSL) is the least popular one with only 8 bullish hedge fund positions. Genuine Parts Company (NYSE:GPC) is not the most popular stock in this group but hedge fund interest is still above average. 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 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. Unfortunately GPC wasn't nearly as popular as these 20 stocks and hedge funds that were betting on GPC were disappointed as the stock returned -3% during the third quarter 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 (view the video below) among hedge funds as many of these stocks already outperformed the market so far this year. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.