The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on September 30th. We at Insider Monkey have made an extensive database of nearly 750 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Gentex Corporation (NASDAQ:GNTX) based on those filings.
Gentex Corporation (NASDAQ:GNTX) has experienced an increase in support from the world's most elite money managers recently. Our calculations also showed that GNTX isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_26092" align="aligncenter" width="482"] Joel Greenblatt of Gotham Asset Management[/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 go over the fresh hedge fund action surrounding Gentex Corporation (NASDAQ:GNTX).
How have hedgies been trading Gentex Corporation (NASDAQ:GNTX)?
At the end of the third quarter, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 22% from the previous quarter. On the other hand, there were a total of 27 hedge funds with a bullish position in GNTX a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Adage Capital Management was the largest shareholder of Gentex Corporation (NASDAQ:GNTX), with a stake worth $103.3 million reported as of the end of September. Trailing Adage Capital Management was Nitorum Capital, which amassed a stake valued at $88 million. Renaissance Technologies, Royce & Associates, and Arrowstreet 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 Nitorum Capital allocated the biggest weight to Gentex Corporation (NASDAQ:GNTX), around 5.12% of its portfolio. Sprott Asset Management is also relatively very bullish on the stock, setting aside 1.12 percent of its 13F equity portfolio to GNTX.
As industrywide interest jumped, key money managers were breaking ground themselves. PEAK6 Capital Management, managed by Matthew Hulsizer, assembled the largest call position in Gentex Corporation (NASDAQ:GNTX). PEAK6 Capital Management had $3.4 million invested in the company at the end of the quarter. Renee Yao's Neo Ivy Capital also initiated a $1.3 million position during the quarter. The following funds were also among the new GNTX investors: John Overdeck and David Siegel's Two Sigma Advisors, David Harding's Winton Capital Management, and Joel Greenblatt's Gotham Asset Management.
Let's now take a look at hedge fund activity in other stocks similar to Gentex Corporation (NASDAQ:GNTX). We will take a look at Five Below Inc (NASDAQ:FIVE), Hexcel Corporation (NYSE:HXL), Alteryx, Inc. (NYSE:AYX), and Catalent Inc (NYSE:CTLT). This group of stocks' market caps are closest to GNTX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FIVE,34,469205,-4 HXL,26,122315,3 AYX,44,1334248,6 CTLT,27,392969,7 Average,32.75,579684,3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.75 hedge funds with bullish positions and the average amount invested in these stocks was $580 million. That figure was $469 million in GNTX's case. Alteryx, Inc. (NYSE:AYX) is the most popular stock in this table. On the other hand Hexcel Corporation (NYSE:HXL) is the least popular one with only 26 bullish hedge fund positions. Gentex Corporation (NASDAQ:GNTX) is not the least popular stock in this group but hedge fund interest is still below average. 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 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately GNTX wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); GNTX investors were disappointed as the stock returned 3.6% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.