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Hedge Funds Are Selling Gentex Corporation (GNTX)

·5 min read

In this article we will analyze whether Gentex Corporation (NASDAQ:GNTX) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Is Gentex Corporation (NASDAQ:GNTX) worth your attention right now? Money managers were becoming less confident. The number of long hedge fund bets were trimmed by 1 in recent months. Gentex Corporation (NASDAQ:GNTX) was in 34 hedge funds' portfolios at the end of June. The all time high for this statistic is 40. Our calculations also showed that GNTX isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 79 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Chuck Royce
Chuck Royce

Chuck Royce of Royce & Associates

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let's analyze the latest hedge fund action encompassing Gentex Corporation (NASDAQ:GNTX).

Do Hedge Funds Think GNTX Is A Good Stock To Buy Now?

At the end of the second quarter, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from the first quarter of 2020. On the other hand, there were a total of 38 hedge funds with a bullish position in GNTX a year ago. With hedgies' capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

Is GNTX A Good Stock To Buy?
Is GNTX A Good Stock To Buy?

More specifically, D E Shaw was the largest shareholder of Gentex Corporation (NASDAQ:GNTX), with a stake worth $80 million reported as of the end of June. Trailing D E Shaw was Renaissance Technologies, which amassed a stake valued at $76.9 million. AQR Capital Management, Royce & Associates, and Nitorum 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 2.28% of its 13F portfolio. Factorial Partners is also relatively very bullish on the stock, earmarking 1.05 percent of its 13F equity portfolio to GNTX.

Due to the fact that Gentex Corporation (NASDAQ:GNTX) has witnessed a decline in interest from the aggregate hedge fund industry, it's easy to see that there lies a certain "tier" of funds that slashed their positions entirely last quarter. It's worth mentioning that Phill Gross and Robert Atchinson's Adage Capital Management dropped the biggest investment of the 750 funds followed by Insider Monkey, comprising an estimated $30.5 million in stock, and Anand Parekh's Alyeska Investment Group was right behind this move, as the fund dropped about $24.2 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 1 funds last quarter.

Let's check out hedge fund activity in other stocks similar to Gentex Corporation (NASDAQ:GNTX). We will take a look at Donaldson Company, Inc. (NYSE:DCI), Amedisys Inc (NASDAQ:AMED), Grupo Televisa SAB (NYSE:TV), Melco Resorts & Entertainment Limited (NASDAQ:MLCO), Hyatt Hotels Corporation (NYSE:H), Gold Fields Limited (NYSE:GFI), and ITT Inc. (NYSE:ITT). All of these stocks' market caps match GNTX's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DCI,21,258723,-7 AMED,26,271283,0 TV,17,1116489,2 MLCO,29,755083,0 H,23,661481,0 GFI,17,301671,2 ITT,20,272006,2 Average,21.9,519534,-0.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.9 hedge funds with bullish positions and the average amount invested in these stocks was $520 million. That figure was $441 million in GNTX's case. Melco Resorts & Entertainment Limited (NASDAQ:MLCO) is the most popular stock in this table. On the other hand Grupo Televisa SAB (NYSE:TV) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Gentex Corporation (NASDAQ:GNTX) is more popular among hedge funds. Our overall hedge fund sentiment score for GNTX is 79.5. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 21.8% in 2021 through October 11th but still managed to beat the market by 4.4 percentage points. Hedge funds were also right about betting on GNTX as the stock returned 10.7% since the end of June (through 10/11) 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.