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Were Hedge Funds Right About GATX Corporation (GATX)?

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Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about GATX Corporation (NYSE:GATX) in this article.

Is GATX Corporation (NYSE:GATX) a bargain? Hedge funds were in an optimistic mood. The number of long hedge fund positions moved up by 4 lately. GATX Corporation (NYSE:GATX) was in 16 hedge funds' portfolios at the end of March. The all time high for this statistic is 21. Our calculations also showed that GATX 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.

Billionaire Paul Tudor Jones' top 10 stock picks
Billionaire Paul Tudor Jones' top 10 stock picks

Paul Tudor Jones of Tudor Investment Corp

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 go over the new hedge fund action regarding GATX Corporation (NYSE:GATX).

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

At the end of March, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GATX over the last 23 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, GAMCO Investors was the largest shareholder of GATX Corporation (NYSE:GATX), with a stake worth $163.2 million reported as of the end of March. Trailing GAMCO Investors was Scopus Asset Management, which amassed a stake valued at $17.3 million. Millennium Management, Arrowstreet Capital, and Tudor Investment Corp 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 GAMCO Investors allocated the biggest weight to GATX Corporation (NYSE:GATX), around 1.43% of its 13F portfolio. Scopus Asset Management is also relatively very bullish on the stock, earmarking 0.22 percent of its 13F equity portfolio to GATX.

With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Renaissance Technologies, established the most valuable position in GATX Corporation (NYSE:GATX). Renaissance Technologies had $2 million invested in the company at the end of the quarter. Greg Eisner's Engineers Gate Manager also made a $0.7 million investment in the stock during the quarter. The following funds were also among the new GATX investors: Peter Muller's PDT Partners, Karim Abbadi and Edward McBride's Centiva Capital, and Jinghua Yan's TwinBeech Capital.

Let's go over hedge fund activity in other stocks similar to GATX Corporation (NYSE:GATX). These stocks are HMS Holdings Corp. (NASDAQ:HMSY), Cogent Communications Holdings Inc. (NASDAQ:CCOI), Associated Banc Corp (NYSE:ASB), GrafTech International Ltd. (NYSE:EAF), Compania Cervecerias Unidas S.A. (NYSE:CCU), MakeMyTrip Limited (NASDAQ:MMYT), and Berkeley Lights, Inc. (NASDAQ:BLI). All of these stocks' market caps are closest to GATX's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HMSY,20,628574,-6 CCOI,18,319894,-5 ASB,24,221388,2 EAF,38,416723,6 CCU,7,22493,-1 MMYT,9,49170,2 BLI,16,410653,0 Average,18.9,295556,-0.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.9 hedge funds with bullish positions and the average amount invested in these stocks was $296 million. That figure was $204 million in GATX's case. GrafTech International Ltd. (NYSE:EAF) is the most popular stock in this table. On the other hand Compania Cervecerias Unidas S.A. (NYSE:CCU) is the least popular one with only 7 bullish hedge fund positions. GATX Corporation (NYSE:GATX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for GATX is 46.4. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 surpassed the market again by 10.1 percentage points. Unfortunately GATX wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); GATX investors were disappointed as the stock returned -2.5% since the end of March (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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Disclosure: None. This article was originally published at Insider Monkey.