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Gamco Investors Inc. (GBL): Are Hedge Funds Right About This Stock?

Abigail Fisher

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards Gamco Investors Inc. (NYSE:GBL).

Gamco Investors Inc. (NYSE:GBL) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 9 hedge funds' portfolios at the end of March. 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 Sprague Resources LP (NYSE:SRLP), TCG BDC, Inc. (NASDAQ:CGBD), and Global Partners LP (NYSE:GLP) to gather more data points. Our calculations also showed that GBL isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 58 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

[caption id="attachment_758440" align="aligncenter" width="399"] Michael Price of MFP Investors[/caption]

Michael Price MFP Investors
Michael Price MFP Investors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to go over the key hedge fund action encompassing Gamco Investors Inc. (NYSE:GBL).

What have hedge funds been doing with Gamco Investors Inc. (NYSE:GBL)?

At Q1's end, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards GBL over the last 18 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Murray Stahl's Horizon Asset Management has the number one position in Gamco Investors Inc. (NYSE:GBL), worth close to $1.7 million, amounting to 0.1% of its total 13F portfolio. On Horizon Asset Management's heels is Renaissance Technologies, which holds a $1.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers with similar optimism encompass Michael Price's MFP Investors, Roger Ibbotson's Zebra Capital Management and Mario Gabelli's GAMCO Investors. In terms of the portfolio weights assigned to each position Zebra Capital Management allocated the biggest weight to Gamco Investors Inc. (NYSE:GBL), around 0.42% of its 13F portfolio. MFP Investors is also relatively very bullish on the stock, designating 0.14 percent of its 13F equity portfolio to GBL.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Marshall Wace LLP. 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 Winton Capital Management).

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Gamco Investors Inc. (NYSE:GBL) but similarly valued. We will take a look at Sprague Resources LP (NYSE:SRLP), TCG BDC, Inc. (NASDAQ:CGBD), Global Partners LP (NYSE:GLP), and Clear Channel Outdoor Holdings, Inc. (NYSE:CCO). All of these stocks' market caps match GBL's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SRLP,4,18879,1 CGBD,7,14522,0 GLP,3,3868,-1 CCO,33,83014,-9 Average,11.75,30071,-2.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $5 million in GBL's case. Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) is the most popular stock in this table. On the other hand Global Partners LP (NYSE:GLP) is the least popular one with only 3 bullish hedge fund positions. Gamco Investors Inc. (NYSE:GBL) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd and surpassed the market by 15.9 percentage points. Unfortunately GBL wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); GBL investors were disappointed as the stock returned 20% during the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

[company-follow-email id=1060349][/company-follow-email]

Disclosure: None. This article was originally published at Insider Monkey.

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