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At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards German American Bancorp., Inc. (NASDAQ:GABC).
Hedge fund interest in German American Bancorp., Inc. (NASDAQ:GABC) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that GABC isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Collegium Pharmaceutical Inc (NASDAQ:COLL), Ranpak Holdings Corp (NYSE:PACK), and Controladora Vuela Co Avcn SA CV (NYSE:VLRS) to gather more data points.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
David Harding of Winton Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now we're going to review the key hedge fund action encompassing German American Bancorp., Inc. (NASDAQ:GABC).
Hedge fund activity in German American Bancorp., Inc. (NASDAQ:GABC)
At the end of September, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2020. On the other hand, there were a total of 7 hedge funds with a bullish position in GABC 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.
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the number one position in German American Bancorp., Inc. (NASDAQ:GABC), worth close to $7 million, corresponding to less than 0.1%% of its total 13F portfolio. Coming in second is Royce & Associates, led by Chuck Royce, holding a $4.7 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining members of the smart money with similar optimism encompass David Harding's Winton Capital Management, John Overdeck and David Siegel's Two Sigma Advisors and . In terms of the portfolio weights assigned to each position Royce & Associates allocated the biggest weight to German American Bancorp., Inc. (NASDAQ:GABC), around 0.05% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, dishing out 0.02 percent of its 13F equity portfolio to GABC.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: AQR Capital Management. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Royce & Associates).
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as German American Bancorp., Inc. (NASDAQ:GABC) but similarly valued. We will take a look at Collegium Pharmaceutical Inc (NASDAQ:COLL), Ranpak Holdings Corp (NYSE:PACK), Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (NYSE:VLRS), Scholastic Corp (NASDAQ:SCHL), GoPro Inc (NASDAQ:GPRO), Enterprise Financial Services Corp (NASDAQ:EFSC), and Partner Communications Company Ltd (NASDAQ:PTNR). This group of stocks' market caps match GABC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position COLL,17,227881,-3 PACK,14,317636,0 VLRS,9,75839,0 SCHL,14,40578,1 GPRO,14,292314,4 EFSC,14,26549,0 PTNR,1,10510,0 Average,11.9,141615,0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.9 hedge funds with bullish positions and the average amount invested in these stocks was $142 million. That figure was $13 million in GABC's case. Collegium Pharmaceutical Inc (NASDAQ:COLL) 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 1 bullish hedge fund positions. German American Bancorp., Inc. (NASDAQ:GABC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for GABC is 31.5. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on GABC as the stock returned 23.2% since the end of the third quarter (through 11/27) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.