How do we determine whether CGI Group Inc. (NYSE:GIB) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
CGI Group Inc. (NYSE:GIB) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 14 hedge funds' portfolios at the end of September. 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 Liberty Broadband Corp (NASDAQ:LBRDK), Liberty Broadband Corp (NASDAQ:LBRDA), and Pembina Pipeline Corp (NYSE:PBA) to gather more data points. Our calculations also showed that GIB isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
According to most traders, hedge funds are viewed as underperforming, old investment vehicles of years past. While there are more than 8000 funds trading at present, Our researchers choose to focus on the elite of this group, around 750 funds. Most estimates calculate that this group of people have their hands on most of the hedge fund industry's total asset base, and by observing their highest performing stock picks, Insider Monkey has come up with a few investment strategies that have historically outpaced Mr. Market. Insider Monkey's flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_745225" align="alignnone" width="1613"] Noam Gottesman of GLG Partners[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. Let's review the fresh hedge fund action regarding CGI Group Inc. (NYSE:GIB).
How are hedge funds trading CGI Group Inc. (NYSE:GIB)?
Heading into the fourth quarter of 2019, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. By comparison, 15 hedge funds held shares or bullish call options in GIB a year ago. With the smart money's sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the biggest position in CGI Group Inc. (NYSE:GIB). Arrowstreet Capital has a $223.4 million position in the stock, comprising 0.5% of its 13F portfolio. Sitting at the No. 2 spot is GLG Partners, led by Noam Gottesman, holding a $47.1 million position; 0.2% of its 13F portfolio is allocated to the company. Other peers that are bullish contain Greg Poole's Echo Street Capital Management, Ray Dalio's Bridgewater Associates and Dmitry Balyasny's Balyasny Asset Management. In terms of the portfolio weights assigned to each position Arrowstreet Capital allocated the biggest weight to CGI Group Inc. (NYSE:GIB), around 0.52% of its 13F portfolio. Qtron Investments is also relatively very bullish on the stock, dishing out 0.51 percent of its 13F equity portfolio to GIB.
Due to the fact that CGI Group Inc. (NYSE:GIB) has experienced bearish sentiment from hedge fund managers, logic holds that there exists a select few money managers who sold off their full holdings last quarter. It's worth mentioning that Paul Marshall and Ian Wace's Marshall Wace dropped the biggest position of all the hedgies tracked by Insider Monkey, valued at an estimated $9.4 million in stock, and Cliff Asness's AQR Capital Management was right behind this move, as the fund sold off about $0.8 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now review hedge fund activity in other stocks similar to CGI Group Inc. (NYSE:GIB). These stocks are Liberty Broadband Corp (NASDAQ:LBRDK), Liberty Broadband Corp (NASDAQ:LBRDA), Pembina Pipeline Corp (NYSE:PBA), and Fastenal Company (NASDAQ:FAST). All of these stocks' market caps are similar to GIB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LBRDK,40,3494094,0 LBRDA,21,694238,1 PBA,10,101496,-2 FAST,28,1046417,-1 Average,24.75,1334061,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.75 hedge funds with bullish positions and the average amount invested in these stocks was $1334 million. That figure was $300 million in GIB's case. Liberty Broadband Corp (NASDAQ:LBRDK) is the most popular stock in this table. On the other hand Pembina Pipeline Corp (NYSE:PBA) is the least popular one with only 10 bullish hedge fund positions. CGI Group Inc. (NYSE:GIB) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately GIB wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); GIB investors were disappointed as the stock returned 5.1% during the first two months of the fourth 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 among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.