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The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on December 31st. We at Insider Monkey have made an extensive database of more than 887 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded GrafTech International Ltd. (NYSE:EAF) based on those filings.
Is EAF stock a buy? GrafTech International Ltd. (NYSE:EAF) was in 32 hedge funds' portfolios at the end of December. The all time high for this statistic is 33. EAF investors should pay attention to an increase in activity from the world's largest hedge funds of late. There were 26 hedge funds in our database with EAF holdings at the end of September. Our calculations also showed that EAF isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).
Sander Gerber of Hudson Bay Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind let's review the recent hedge fund action regarding GrafTech International Ltd. (NYSE:EAF).
Do Hedge Funds Think EAF Is A Good Stock To Buy Now?
At fourth quarter's end, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 23% from the third quarter of 2020. By comparison, 33 hedge funds held shares or bullish call options in EAF a year ago. With hedge funds' sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
More specifically, Yacktman Asset Management was the largest shareholder of GrafTech International Ltd. (NYSE:EAF), with a stake worth $57.2 million reported as of the end of December. Trailing Yacktman Asset Management was Indus Capital, which amassed a stake valued at $29.7 million. Arrowstreet Capital, AQR Capital Management, and CaaS 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 Indus Capital allocated the biggest weight to GrafTech International Ltd. (NYSE:EAF), around 4.61% of its 13F portfolio. Parian Global Management is also relatively very bullish on the stock, earmarking 2.11 percent of its 13F equity portfolio to EAF.
Now, specific money managers were breaking ground themselves. CaaS Capital, managed by Frank Fu, initiated the most outsized position in GrafTech International Ltd. (NYSE:EAF). CaaS Capital had $15.9 million invested in the company at the end of the quarter. Zachary Miller's Parian Global Management also initiated a $8.1 million position during the quarter. The other funds with brand new EAF positions are Simon Sadler's Segantii Capital, Sander Gerber's Hudson Bay Capital Management, and David Greenspan's Slate Path Capital.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as GrafTech International Ltd. (NYSE:EAF) but similarly valued. We will take a look at Cornerstone OnDemand, Inc. (NASDAQ:CSOD), Broadstone Net Lease, Inc. (NYSE:BNL), Veracyte Inc (NASDAQ:VCYT), MaxLinear, Inc. (NYSE:MXL), Cogent Communications Holdings Inc. (NASDAQ:CCOI), Evertec Inc (NYSE:EVTC), and Telecom Argentina S.A. (NYSE:TEO). This group of stocks' market values are closest to EAF's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CSOD,34,592642,10 BNL,11,42971,-1 VCYT,15,472048,3 MXL,13,130013,-5 CCOI,23,357183,-5 EVTC,22,258424,1 TEO,6,25243,1 Average,17.7,268361,0.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.7 hedge funds with bullish positions and the average amount invested in these stocks was $268 million. That figure was $232 million in EAF's case. Cornerstone OnDemand, Inc. (NASDAQ:CSOD) is the most popular stock in this table. On the other hand Telecom Argentina S.A. (NYSE:TEO) is the least popular one with only 6 bullish hedge fund positions. GrafTech International Ltd. (NYSE:EAF) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for EAF is 85.5. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.2% in 2021 through April 12th and still beat the market by 1.5 percentage points. Hedge funds were also right about betting on EAF, though not to the same extent, as the stock returned 8.2% since Q4 (through April 12th) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.