A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31, so let’s proceed with the discussion of the hedge fund sentiment on W.R. Grace & Co. (NYSE:GRA).
Hedge fund interest in W.R. Grace & Co. (NYSE:GRA) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare GRA to other stocks including Life Storage, Inc. (NYSE:LSI), Oshkosh Corporation (NYSE:OSK), and Axis Capital Holdings Limited (NYSE:AXS) to get a better sense of its popularity.
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.
Let's review the recent hedge fund action surrounding W.R. Grace & Co. (NYSE:GRA).
How are hedge funds trading W.R. Grace & Co. (NYSE:GRA)?
At Q4's end, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 31 hedge funds with a bullish position in GRA 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.
The largest stake in W.R. Grace & Co. (NYSE:GRA) was held by 40 North Management, which reported holding $606.6 million worth of stock at the end of September. It was followed by Soroban Capital Partners with a $207.7 million position. Other investors bullish on the company included Iridian Asset Management, Echo Street Capital Management, and Highline Capital Management.
Judging by the fact that W.R. Grace & Co. (NYSE:GRA) has faced falling interest from the smart money, it's safe to say that there was a specific group of fund managers that decided to sell off their entire stakes last quarter. Intriguingly, Phill Gross and Robert Atchinson's Adage Capital Management cut the largest position of the 700 funds followed by Insider Monkey, totaling about $41.8 million in stock. Nick Niell's fund, Arrowgrass Capital Partners, also said goodbye to its stock, about $21.7 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as W.R. Grace & Co. (NYSE:GRA) but similarly valued. These stocks are Life Storage, Inc. (NYSE:LSI), Oshkosh Corporation (NYSE:OSK), Axis Capital Holdings Limited (NYSE:AXS), and Littelfuse, Inc. (NASDAQ:LFUS). This group of stocks' market caps are closest to GRA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LSI,13,159045,1 OSK,29,384530,-1 AXS,30,716155,9 LFUS,15,254089,-7 Average,21.75,378455,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $378 million. That figure was $1688 million in GRA's case. Axis Capital Holdings Limited (NYSE:AXS) is the most popular stock in this table. On the other hand Life Storage, Inc. (NYSE:LSI) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks W.R. Grace & Co. (NYSE:GRA) is more popular among hedge funds. 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. Hedge funds were also right about betting on GRA, though not to the same extent, as the stock returned 18.5% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.