Were Hedge Funds Right About Gates Industrial Corporation plc (GTES)?
In this article we will take a look at whether hedge funds think Gates Industrial Corporation plc (NYSE:GTES) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Gates Industrial Corporation plc (NYSE:GTES) was in 18 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 15. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. GTES investors should pay attention to an increase in hedge fund sentiment of late. There were 14 hedge funds in our database with GTES positions at the end of the fourth quarter. Our calculations also showed that GTES isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Israel Englander of Millennium Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium 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. Keeping this in mind let's view the recent hedge fund action encompassing Gates Industrial Corporation plc (NYSE:GTES).
Do Hedge Funds Think GTES Is A Good Stock To Buy Now?
At first quarter's end, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 29% from one quarter earlier. By comparison, 8 hedge funds held shares or bullish call options in GTES a year ago. With hedgies' sentiment swirling, there exists a select group of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
More specifically, Alyeska Investment Group was the largest shareholder of Gates Industrial Corporation plc (NYSE:GTES), with a stake worth $18.1 million reported as of the end of March. Trailing Alyeska Investment Group was Millennium Management, which amassed a stake valued at $13 million. Driehaus Capital, Impax Asset Management, and Renaissance Technologies 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 Pinz Capital allocated the biggest weight to Gates Industrial Corporation plc (NYSE:GTES), around 1.37% of its 13F portfolio. Intrinsic Edge Capital is also relatively very bullish on the stock, designating 0.48 percent of its 13F equity portfolio to GTES.
As industrywide interest jumped, specific money managers were leading the bulls' herd. Alyeska Investment Group, managed by Anand Parekh, assembled the biggest position in Gates Industrial Corporation plc (NYSE:GTES). Alyeska Investment Group had $18.1 million invested in the company at the end of the quarter. Richard Driehaus's Driehaus Capital also made a $12.6 million investment in the stock during the quarter. The other funds with brand new GTES positions are Matthew L Pinz's Pinz Capital, John Overdeck and David Siegel's Two Sigma Advisors, and Kevin Michael Ulrich and Anthony Davis's Anchorage Advisors.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Gates Industrial Corporation plc (NYSE:GTES) but similarly valued. We will take a look at Bloom Energy Corporation (NYSE:BE), FuelCell Energy, Inc. (NASDAQ:FCEL), Grupo Aeroportuario del Pacifico (NYSE:PAC), Turning Point Therapeutics, Inc. (NASDAQ:TPTX), PennyMac Financial Services Inc (NYSE:PFSI), Silgan Holdings Inc. (NASDAQ:SLGN), and The Chemours Company (NYSE:CC). This group of stocks' market valuations are closest to GTES's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BE,22,108937,3 FCEL,13,68015,-2 PAC,5,95131,1 TPTX,33,805626,6 PFSI,25,555644,-4 SLGN,17,246378,1 CC,27,544703,-3 Average,20.3,346348,0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.3 hedge funds with bullish positions and the average amount invested in these stocks was $346 million. That figure was $101 million in GTES's case. Turning Point Therapeutics, Inc. (NASDAQ:TPTX) is the most popular stock in this table. On the other hand Grupo Aeroportuario del Pacifico (NYSE:PAC) is the least popular one with only 5 bullish hedge fund positions. Gates Industrial Corporation plc (NYSE:GTES) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for GTES is 62.2. 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 gained 28.5% in 2021 through July 23rd and beat the market by 10.1 percentage points. A small number of hedge funds were also right about betting on GTES, though not to the same extent, as the stock returned 13.4% since the end of Q1 (through July 23rd) and outperformed the market.
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Disclosure: None. This article was originally published at Insider Monkey.
