Hedge Funds Are Done Buying Gartner Inc (IT)
We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Gartner Inc (NYSE:IT) and determine whether hedge funds skillfully traded this stock.
Gartner Inc (NYSE:IT) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 32 hedge funds' portfolios at the end of June. Our calculations also showed that IT isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Trimble Inc. (NASDAQ:TRMB), VICI Properties Inc. (NYSE:VICI), and Citizens Financial Group Inc (NYSE:CFG) to gather more data points. Our calculations also showed that IT isn't among the 30 most popular stocks among hedge funds (click for Q2 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.
In the financial world there are a multitude of gauges shareholders can use to appraise their stock investments. Two of the less utilized gauges are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the best picks of the top money managers can trounce the market by a healthy amount (see the details here).
David Blood of Generation Investment Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. With all of this in mind we're going to go over the new hedge fund action surrounding Gartner Inc (NYSE:IT).
How have hedgies been trading Gartner Inc (NYSE:IT)?
At Q2's end, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 17 hedge funds held shares or bullish call options in IT a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
More specifically, Generation Investment Management was the largest shareholder of Gartner Inc (NYSE:IT), with a stake worth $612.8 million reported as of the end of September. Trailing Generation Investment Management was Bares Capital Management, which amassed a stake valued at $293.4 million. Melvin Capital Management, D E Shaw, and Nishkama Capital 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 Nishkama Capital allocated the biggest weight to Gartner Inc (NYSE:IT), around 11.15% of its 13F portfolio. Bares Capital Management is also relatively very bullish on the stock, setting aside 7.24 percent of its 13F equity portfolio to IT.
Since Gartner Inc (NYSE:IT) has faced falling interest from the aggregate hedge fund industry, we can see that there was a specific group of hedgies that decided to sell off their full holdings in the second quarter. At the top of the heap, Dmitry Balyasny's Balyasny Asset Management said goodbye to the biggest stake of all the hedgies followed by Insider Monkey, valued at close to $7 million in stock, and Anand Parekh's Alyeska Investment Group was right behind this move, as the fund cut about $3.8 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's go over hedge fund activity in other stocks similar to Gartner Inc (NYSE:IT). These stocks are Trimble Inc. (NASDAQ:TRMB), VICI Properties Inc. (NYSE:VICI), Citizens Financial Group Inc (NYSE:CFG), StoneCo Ltd. (NASDAQ:STNE), United Rentals, Inc. (NYSE:URI), Booz Allen Hamilton Holding Corporation (NYSE:BAH), and Cable One Inc (NYSE:CABO). All of these stocks' market caps are similar to IT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TRMB,26,979865,6 VICI,51,1573468,15 CFG,47,841328,1 STNE,35,1342781,1 URI,40,889794,-3 BAH,25,219237,-2 CABO,24,684886,1 Average,35.4,933051,2.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.4 hedge funds with bullish positions and the average amount invested in these stocks was $933 million. That figure was $1302 million in IT's case. VICI Properties Inc. (NYSE:VICI) is the most popular stock in this table. On the other hand Cable One Inc (NYSE:CABO) is the least popular one with only 24 bullish hedge fund positions. Gartner Inc (NYSE:IT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for IT is 49.8. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 gained 23.8% in 2020 through September 14th and surpassed the market by 17.6 percentage points. Unfortunately IT wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); IT investors were disappointed as the stock returned 9.3% since Q2 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
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