Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through November 22nd. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 52% and 49% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That's why we weren't surprised when hedge funds’ top 20 large-cap stock picks generated a return of 34.7% in 2019 (through November 22) and outperformed the broader market benchmark by 8.5 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Gravity Co., LTD. (NASDAQ:GRVY) was in 3 hedge funds' portfolios at the end of September. GRVY investors should pay attention to a decrease in hedge fund interest of late. There were 6 hedge funds in our database with GRVY positions at the end of the previous quarter. Our calculations also showed that GRVY isn't among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_26255" align="aligncenter" width="450"] Louis Navellier of Navellier & Associates[/caption]
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 analyze the latest hedge fund action regarding Gravity Co., LTD. (NASDAQ:GRVY).
Hedge fund activity in Gravity Co., LTD. (NASDAQ:GRVY)
Heading into the fourth quarter of 2019, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -50% from the previous quarter. By comparison, 2 hedge funds held shares or bullish call options in GRVY a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
The largest stake in Gravity Co., LTD. (NASDAQ:GRVY) was held by Arrowstreet Capital, which reported holding $1.6 million worth of stock at the end of September. It was followed by Two Sigma Advisors with a $0.5 million position. The only other hedge fund that is bullish on the company was Navellier & Associates.
Seeing as Gravity Co., LTD. (NASDAQ:GRVY) has experienced bearish sentiment from the entirety of the hedge funds we track, it's safe to say that there exists a select few fund managers that slashed their positions entirely in the third quarter. Intriguingly, Israel Englander's Millennium Management said goodbye to the largest investment of all the hedgies tracked by Insider Monkey, valued at an estimated $0.4 million in stock. Renaissance Technologies, also cut its stock, about $0.4 million worth. These moves are important to note, as total hedge fund interest dropped by 3 funds in the third quarter.
Let's check out hedge fund activity in other stocks similar to Gravity Co., LTD. (NASDAQ:GRVY). We will take a look at Bioceres Crop Solutions Corp. (NYSE:BIOX), MVB Financial Corp. (NASDAQ:MVBF), Akoustis Technologies, Inc. (NASDAQ:AKTS), and SeaSpine Holdings Corp (NASDAQ:SPNE). All of these stocks' market caps are similar to GRVY's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BIOX,3,261,-1 MVBF,4,25454,1 AKTS,6,4784,2 SPNE,7,14269,0 Average,5,11192,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 5 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $3 million in GRVY's case. SeaSpine Holdings Corp (NASDAQ:SPNE) is the most popular stock in this table. On the other hand Bioceres Crop Solutions Corp. (NYSE:BIOX) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Gravity Co., LTD. (NASDAQ:GRVY) is even less popular than BIOX. Hedge funds clearly dropped the ball on GRVY as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. A small number of hedge funds were also right about betting on GRVY as the stock returned 11.5% during the fourth quarter (through 11/22) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
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