Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients' money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth also depends on it. Regardless of the various methods used by elite investors like David Tepper and David Abrams, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space.
GCP Applied Technologies Inc. (NYSE:GCP) shareholders have witnessed a decrease in activity from the world's largest hedge funds recently. GCP was in 16 hedge funds' portfolios at the end of the fourth quarter of 2018. There were 19 hedge funds in our database with GCP positions at the end of the previous quarter. Our calculations also showed that GCP isn't among the 30 most popular stocks among hedge funds.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to take a look at the new hedge fund action surrounding GCP Applied Technologies Inc. (NYSE:GCP).
What does the smart money think about GCP Applied Technologies Inc. (NYSE:GCP)?
At Q4's end, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -16% from the previous quarter. By comparison, 22 hedge funds held shares or bullish call options in GCP a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, 40 North Management held the most valuable stake in GCP Applied Technologies Inc. (NYSE:GCP), which was worth $125.5 million at the end of the fourth quarter. On the second spot was GAMCO Investors which amassed $74.9 million worth of shares. Moreover, Adage Capital Management, Moore Global Investments, and Gates Capital Management were also bullish on GCP Applied Technologies Inc. (NYSE:GCP), allocating a large percentage of their portfolios to this stock.
Since GCP Applied Technologies Inc. (NYSE:GCP) has witnessed declining sentiment from the entirety of the hedge funds we track, we can see that there was a specific group of funds that elected to cut their positions entirely heading into Q3. Intriguingly, Malcolm Fairbairn's Ascend Capital cut the largest investment of the "upper crust" of funds followed by Insider Monkey, valued at close to $4.4 million in stock, and Jim Simons's Renaissance Technologies was right behind this move, as the fund said goodbye to about $3 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 3 funds heading into Q3.
Let's check out hedge fund activity in other stocks similar to GCP Applied Technologies Inc. (NYSE:GCP). These stocks are Renasant Corporation (NASDAQ:RNST), Columbia Financial, Inc. (NASDAQ:CLBK), Pacira Pharmaceuticals Inc (NASDAQ:PCRX), and Mack Cali Realty Corp (NYSE:CLI). This group of stocks' market values match GCP's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RNST,13,34274,-4 CLBK,6,25171,-1 PCRX,25,540796,0 CLI,9,115323,-2 Average,13.25,178891,-1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $179 million. That figure was $435 million in GCP's case. Pacira Pharmaceuticals Inc (NASDAQ:PCRX) is the most popular stock in this table. On the other hand Columbia Financial, Inc. (NASDAQ:CLBK) is the least popular one with only 6 bullish hedge fund positions. GCP Applied Technologies Inc. (NYSE:GCP) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately GCP wasn't nearly as popular as these 15 stock and hedge funds that were betting on GCP were disappointed as the stock returned 15.1% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.