We at Insider Monkey have gone over 738 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of March 31st. In this article, we look at what those funds think of Gerdau SA (NYSE:GGB) based on that data.
Gerdau SA (NYSE:GGB) was in 10 hedge funds' portfolios at the end of the first quarter of 2019. GGB investors should pay attention to a decrease in enthusiasm from smart money lately. There were 12 hedge funds in our database with GGB holdings at the end of the previous quarter. Our calculations also showed that ggb 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' 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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
Let's take a peek at the new hedge fund action surrounding Gerdau SA (NYSE:GGB).
How have hedgies been trading Gerdau SA (NYSE:GGB)?
At the end of the first quarter, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from one quarter earlier. On the other hand, there were a total of 14 hedge funds with a bullish position in GGB 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.
The largest stake in Gerdau SA (NYSE:GGB) was held by Contrarian Capital, which reported holding $76.7 million worth of stock at the end of March. It was followed by GLG Partners with a $37.6 million position. Other investors bullish on the company included Contrarian Capital, Capital Growth Management, and Fisher Asset Management.
Since Gerdau SA (NYSE:GGB) has experienced a decline in interest from the smart money, it's easy to see that there is a sect of funds that decided to sell off their full holdings by the end of the third quarter. Intriguingly, Jim Simons's Renaissance Technologies dropped the largest position of the "upper crust" of funds followed by Insider Monkey, worth close to $5.6 million in stock, and David Halpert's Prince Street Capital Management was right behind this move, as the fund said goodbye to about $0.8 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 2 funds by the end of the third quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Gerdau SA (NYSE:GGB) but similarly valued. We will take a look at Guardant Health, Inc. (NASDAQ:GH), HubSpot Inc (NYSE:HUBS), Arrow Electronics, Inc. (NYSE:ARW), and Perrigo Company plc (NYSE:PRGO). This group of stocks' market values match GGB's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GH,14,174703,7 HUBS,29,621767,7 ARW,22,472588,1 PRGO,18,662267,-5 Average,20.75,482831,2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $483 million. That figure was $169 million in GGB's case. HubSpot Inc (NYSE:HUBS) is the most popular stock in this table. On the other hand Guardant Health, Inc. (NASDAQ:GH) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Gerdau SA (NYSE:GGB) is even less popular than GH. Hedge funds dodged a bullet by taking a bearish stance towards GGB. Our calculations showed that the top 20 most popular hedge fund stocks returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately GGB wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); GGB investors were disappointed as the stock returned -0.5% during the same time frame 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 13 of these stocks already outperformed the market so far in the second quarter.
Disclosure: None. This article was originally published at Insider Monkey.