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Is Garmin Ltd. (GRMN) A Good Stock To Buy?

Nina Todic

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Garmin Ltd. (NASDAQ:GRMN). The stock is a popular ETF holding Currently there are 3 ETFs with at least 5% allocation to GRMN: Global X Internet of Things ETF (NASDAQ:SNSR), Procure Space ETF (NYSE:UFO), and Invesco Dynamic Networking ETF (NYSE:PXQ).

Is Garmin Ltd. (NASDAQ:GRMN) a bargain? Hedge funds are in a pessimistic mood. The number of long hedge fund positions fell by 6 lately. Our calculations also showed that GRMN isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). GRMN was in 26 hedge funds' portfolios at the end of the third quarter of 2019. There were 32 hedge funds in our database with GRMN positions at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

Today there are plenty of gauges market participants can use to size up their holdings. A duo of the most useful gauges are hedge fund and insider trading activity. We have shown that, historically, those who follow the best picks of the top fund managers can beat the market by a superb amount (see the details here).

[caption id="attachment_673876" align="aligncenter" width="473"] John Overdeck of Two Sigma Advisors[/caption]

John Overdeck of Two Sigma

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to take a glance at the fresh hedge fund action encompassing Garmin Ltd. (NASDAQ:GRMN).

What does smart money think about Garmin Ltd. (NASDAQ:GRMN)?

Heading into the fourth quarter of 2019, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -19% from the previous quarter. On the other hand, there were a total of 27 hedge funds with a bullish position in GRMN a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with GRMN Positions

When looking at the institutional investors followed by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the biggest position in Garmin Ltd. (NASDAQ:GRMN). AQR Capital Management has a $140.4 million position in the stock, comprising 0.2% of its 13F portfolio. Sitting at the No. 2 spot is Robert Joseph Caruso of Select Equity Group, with a $121.7 million position; the fund has 0.8% of its 13F portfolio invested in the stock. Remaining peers with similar optimism comprise David E. Shaw's D E Shaw, Renaissance Technologies and John Overdeck and David Siegel's Two Sigma Advisors. In terms of the portfolio weights assigned to each position Select Equity Group allocated the biggest weight to Garmin Ltd. (NASDAQ:GRMN), around 0.82% of its portfolio. Quantinno Capital is also relatively very bullish on the stock, setting aside 0.3 percent of its 13F equity portfolio to GRMN.

Since Garmin Ltd. (NASDAQ:GRMN) has experienced a decline in interest from the aggregate hedge fund industry, it's safe to say that there is a sect of fund managers who sold off their entire stakes by the end of the third quarter. It's worth mentioning that Benjamin A. Smith's Laurion Capital Management dumped the biggest stake of the 750 funds followed by Insider Monkey, valued at an estimated $2.1 million in stock. Steve Cohen's fund, Point72 Asset Management, also sold off its stock, about $1.8 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 6 funds by the end of the third quarter.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Garmin Ltd. (NASDAQ:GRMN) but similarly valued. These stocks are Incyte Corporation (NASDAQ:INCY), Principal Financial Group Inc (NASDAQ:PFG), Invitation Homes Inc. (NYSE:INVH), and Citizens Financial Group Inc (NYSE:CFG). All of these stocks' market caps match GRMN's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position INCY,32,3214518,-4 PFG,19,98613,2 INVH,28,1096604,-3 CFG,38,1571462,-1 Average,29.25,1495299,-1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.25 hedge funds with bullish positions and the average amount invested in these stocks was $1495 million. That figure was $504 million in GRMN's case. Citizens Financial Group Inc (NYSE:CFG) is the most popular stock in this table. On the other hand Principal Financial Group Inc (NASDAQ:PFG) is the least popular one with only 19 bullish hedge fund positions. Garmin Ltd. (NASDAQ:GRMN) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on GRMN as the stock returned 15.4% during the first two months of Q4 and outperformed the market by an even larger margin.

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

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