At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards GP Strategies Corporation (NYSE:GPX) at the end of the first quarter and determine whether the smart money was really smart about this stock.
Is GP Strategies Corporation (NYSE:GPX) worth your attention right now? Prominent investors were in a bullish mood. The number of long hedge fund positions increased by 2 recently. Our calculations also showed that GPX 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.
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 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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Jeffrey Bronchick of Cove Street Capital[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. 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. Keeping this in mind we're going to take a look at the key hedge fund action encompassing GP Strategies Corporation (NYSE:GPX).
How are hedge funds trading GP Strategies Corporation (NYSE:GPX)?
Heading into the second quarter of 2020, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from one quarter earlier. By comparison, 12 hedge funds held shares or bullish call options in GPX 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.
The largest stake in GP Strategies Corporation (NYSE:GPX) was held by Cove Street Capital, which reported holding $16.1 million worth of stock at the end of September. It was followed by Royce & Associates with a $9.4 million position. Other investors bullish on the company included Rutabaga Capital Management, Minerva Advisors, and D E Shaw. In terms of the portfolio weights assigned to each position Cove Street Capital allocated the biggest weight to GP Strategies Corporation (NYSE:GPX), around 3.3% of its 13F portfolio. Rutabaga Capital Management is also relatively very bullish on the stock, earmarking 1.64 percent of its 13F equity portfolio to GPX.
As industrywide interest jumped, some big names were breaking ground themselves. Invenomic Capital Management, managed by Ali Motamed, assembled the most outsized position in GP Strategies Corporation (NYSE:GPX). Invenomic Capital Management had $0.2 million invested in the company at the end of the quarter. Israel Englander's Millennium Management also made a $0.1 million investment in the stock during the quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as GP Strategies Corporation (NYSE:GPX) but similarly valued. These stocks are Aptorum Group Limited (NASDAQ:APM), Hawthorn Bancshares, Inc. (NASDAQ:HWBK), PB Bancorp, Inc. (NASDAQ:PBBI), and Pacific Mercantile Bancorp (NASDAQ:PMBC). This group of stocks' market values are similar to GPX's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position APM,1,121,1 HWBK,1,1630,-1 PBBI,8,15629,-1 PMBC,5,14483,0 Average,3.75,7966,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.75 hedge funds with bullish positions and the average amount invested in these stocks was $8 million. That figure was $31 million in GPX's case. PB Bancorp, Inc. (NASDAQ:PBBI) is the most popular stock in this table. On the other hand Aptorum Group Limited (NASDAQ:APM) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks GP Strategies Corporation (NYSE:GPX) is more popular among hedge funds. 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 returned 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on GPX as the stock returned 31.8% in Q2 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.