We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (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. Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Graphic Packaging Holding Company (NYSE:GPK).
Graphic Packaging Holding Company (NYSE:GPK) was in 39 hedge funds' portfolios at the end of the fourth quarter of 2019. GPK has experienced an increase in activity from the world's largest hedge funds recently. There were 36 hedge funds in our database with GPK holdings at the end of the previous quarter. Our calculations also showed that GPK isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 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_256989" align="aligncenter" width="399"] Dmitry Balyasny of Balyasny Asset Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. With all of this in mind let's check out the recent hedge fund action encompassing Graphic Packaging Holding Company (NYSE:GPK).
Hedge fund activity in Graphic Packaging Holding Company (NYSE:GPK)
At the end of the fourth quarter, a total of 39 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the third quarter of 2019. By comparison, 20 hedge funds held shares or bullish call options in GPK a year ago. So, let's check out 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, Ken Griffin's Citadel Investment Group has the largest position in Graphic Packaging Holding Company (NYSE:GPK), worth close to $153.8 million, comprising 0.1% of its total 13F portfolio. Sitting at the No. 2 spot is D E Shaw, managed by D. E. Shaw, which holds a $61.7 million position; 0.1% of its 13F portfolio is allocated to the company. Some other members of the smart money that are bullish consist of Steve Cohen's Point72 Asset Management, Israel Englander's Millennium Management and Andrew Kurita's Kettle Hill Capital Management. In terms of the portfolio weights assigned to each position Kettle Hill Capital Management allocated the biggest weight to Graphic Packaging Holding Company (NYSE:GPK), around 9.04% of its 13F portfolio. 12th Street Asset Management is also relatively very bullish on the stock, earmarking 7.33 percent of its 13F equity portfolio to GPK.
With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Impax Asset Management, managed by Ian Simm, established the biggest position in Graphic Packaging Holding Company (NYSE:GPK). Impax Asset Management had $12.9 million invested in the company at the end of the quarter. Andrew Byington's Appian Way Asset Management also made a $6.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Cliff Asness's AQR Capital Management, John Brennan's Sirios Capital Management, and Dmitry Balyasny's Balyasny Asset Management.
Let's now take a look at hedge fund activity in other stocks similar to Graphic Packaging Holding Company (NYSE:GPK). We will take a look at Black Hills Corporation (NYSE:BKH), Carter's, Inc. (NYSE:CRI), Repligen Corporation (NASDAQ:RGEN), and Global Blood Therapeutics Inc (NASDAQ:GBT). This group of stocks' market valuations are closest to GPK's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BKH,24,200216,3 CRI,21,263204,-4 RGEN,23,247507,-3 GBT,23,793382,-3 Average,22.75,376077,-1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $376 million. That figure was $551 million in GPK's case. Black Hills Corporation (NYSE:BKH) is the most popular stock in this table. On the other hand Carter's, Inc. (NYSE:CRI) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Graphic Packaging Holding Company (NYSE:GPK) 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. These stocks lost 17.4% in 2020 through March 25th and still beat the market by 5.5 percentage points. Unfortunately GPK wasn't nearly as popular as these 20 stocks and hedge funds that were betting on GPK were disappointed as the stock returned -27.8% during the first two and a half months of 2020 (through March 25th) and underperformed 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 most of these stocks already outperformed the market in Q1. 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.