2018's fourth quarter was a rough one for investors and many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 41.3% in 2019 and outperformed the S&P 500 ETF by more than 10 percentage points. In this article we will study how hedge fund sentiment towards Garrett Motion Inc. (NYSE:GTX) changed during the third quarter and how the stock performed in comparison to hedge fund consensus stocks.
Garrett Motion Inc. (NYSE:GTX) shareholders have witnessed an increase in hedge fund sentiment lately. Our calculations also showed that GTX isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_25717" align="aligncenter" width="548"] Steven Cohen of Point72 Asset Management[/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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock is still extremely cheap despite already gaining 20 percent. Now let's take a look at the fresh hedge fund action surrounding Garrett Motion Inc. (NYSE:GTX).
How have hedgies been trading Garrett Motion Inc. (NYSE:GTX)?
At Q3's end, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards GTX over the last 17 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Deccan Value Advisors, managed by Vinit Bodas, holds the largest position in Garrett Motion Inc. (NYSE:GTX). Deccan Value Advisors has a $73 million position in the stock, comprising 6.4% of its 13F portfolio. The second most bullish fund manager is John Petry of Sessa Capital, with a $66.3 million position; the fund has 7.6% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish include Noah Levy and Eugene Dozortsev's Newtyn Management, Steve Cohen's Point72 Asset Management and Frederick Tucker Golden's Solas Capital Management. In terms of the portfolio weights assigned to each position Solas Capital Management allocated the biggest weight to Garrett Motion Inc. (NYSE:GTX), around 7.73% of its 13F portfolio. Sessa Capital is also relatively very bullish on the stock, designating 7.56 percent of its 13F equity portfolio to GTX.
Now, key money managers have been driving this bullishness. Newtyn Management, managed by Noah Levy and Eugene Dozortsev, established the biggest call position in Garrett Motion Inc. (NYSE:GTX). Newtyn Management had $3.2 million invested in the company at the end of the quarter. Sander Gerber's Hudson Bay Capital Management also made a $2.7 million investment in the stock during the quarter. The following funds were also among the new GTX investors: Paul Marshall and Ian Wace's Marshall Wace, Phill Gross and Robert Atchinson's Adage Capital Management, and Ken Griffin's Citadel Investment Group.
Let's also examine hedge fund activity in other stocks similar to Garrett Motion Inc. (NYSE:GTX). These stocks are ChipMOS TECHNOLOGIES INC. (NASDAQ:IMOS), Bryn Mawr Bank Corp. (NASDAQ:BMTC), Whiting Petroleum Corporation (NYSE:WLL), and The Andersons, Inc. (NASDAQ:ANDE). This group of stocks' market caps are closest to GTX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IMOS,3,33579,1 BMTC,9,36594,0 WLL,25,58618,2 ANDE,14,52713,9 Average,12.75,45376,3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $45 million. That figure was $208 million in GTX's case. Whiting Petroleum Corporation (NYSE:WLL) is the most popular stock in this table. On the other hand ChipMOS TECHNOLOGIES INC. (NASDAQ:IMOS) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Garrett Motion Inc. (NYSE:GTX) is more popular among hedge funds. 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 10.1 percentage points. Unfortunately GTX wasn't nearly as popular as these 20 stocks and hedge funds that were betting on GTX were disappointed as the stock returned -19% in 2019 and trailed 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 65 percent of these stocks outperformed the market in 2019. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.