In this article we will analyze whether CGI Inc. (NYSE:GIB) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.
Is GIB a good stock to buy now? Hedge funds were in an optimistic mood. The number of long hedge fund bets improved by 1 in recent months. CGI Inc. (NYSE:GIB) was in 20 hedge funds' portfolios at the end of September. The all time high for this statistic is 19. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. 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 for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Lee Ainslie of Maverick Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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. Keeping this in mind let's review the new hedge fund action surrounding CGI Inc. (NYSE:GIB).
Do Hedge Funds Think GIB Is A Good Stock To Buy Now?
At the end of September, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the previous quarter. By comparison, 16 hedge funds held shares or bullish call options in GIB a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Arrowstreet Capital held the most valuable stake in CGI Inc. (NYSE:GIB), which was worth $90.8 million at the end of the third quarter. On the second spot was D E Shaw which amassed $24.5 million worth of shares. Galibier Capital Management, GLG Partners, and Two Sigma Advisors 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 Galibier Capital Management allocated the biggest weight to CGI Inc. (NYSE:GIB), around 5.01% of its 13F portfolio. Provenire Capital is also relatively very bullish on the stock, earmarking 2.85 percent of its 13F equity portfolio to GIB.
Consequently, key hedge funds were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, initiated the biggest position in CGI Inc. (NYSE:GIB). Marshall Wace LLP had $3.3 million invested in the company at the end of the quarter. Lee Ainslie's Maverick Capital also initiated a $1.3 million position during the quarter. The other funds with brand new GIB positions are Peter Muller's PDT Partners and Kerr Neilson's Platinum Asset Management.
Let's now review hedge fund activity in other stocks similar to CGI Inc. (NYSE:GIB). These stocks are Conagra Brands, Inc. (NYSE:CAG), Restaurant Brands International Inc (NYSE:QSR), Canon Inc. (NYSE:CAJ), Amcor plc (NYSE:AMCR), Deutsche Bank AG (NYSE:DB), ViacomCBS Inc. (NASDAQ:VIAC), and Hologic, Inc. (NASDAQ:HOLX). This group of 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 CAG,35,770291,0 QSR,33,2742752,-11 CAJ,7,52605,-2 AMCR,18,238966,2 DB,15,1118364,4 VIAC,44,1249345,-1 HOLX,50,1146336,4 Average,28.9,1045523,-0.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.9 hedge funds with bullish positions and the average amount invested in these stocks was $1046 million. That figure was $191 million in GIB's case. Hologic, Inc. (NASDAQ:HOLX) is the most popular stock in this table. On the other hand Canon Inc. (NYSE:CAJ) is the least popular one with only 7 bullish hedge fund positions. CGI Inc. (NYSE:GIB) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for GIB is 51.1. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on GIB as the stock returned 12.1% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.