Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Group 1 Automotive, Inc. (NYSE:GPI) based on that data and determine whether they were really smart about the stock.
Group 1 Automotive, Inc. (NYSE:GPI) investors should pay attention to an increase in enthusiasm from smart money of late. Group 1 Automotive, Inc. (NYSE:GPI) was in 21 hedge funds’ portfolios at the end of June. The all time high for this statistics is 25. Our calculations also showed that GPI isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Ricky Sandler of Eminence Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. We are also checking out this lithium company which could benefit from the electric car adoption. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. With all of this in mind we’re going to analyze the recent hedge fund action surrounding Group 1 Automotive, Inc. (NYSE:GPI).
Hedge fund activity in Group 1 Automotive, Inc. (NYSE:GPI)
At the end of the second quarter, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 40% from one quarter earlier. On the other hand, there were a total of 13 hedge funds with a bullish position in GPI a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Group 1 Automotive, Inc. (NYSE:GPI) was held by Eminence Capital, which reported holding $87.3 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $16.3 million position. Other investors bullish on the company included Millennium Management, Renaissance Technologies, and Six Columns Capital. In terms of the portfolio weights assigned to each position Voss Capital allocated the biggest weight to Group 1 Automotive, Inc. (NYSE:GPI), around 3.03% of its 13F portfolio. Six Columns Capital is also relatively very bullish on the stock, earmarking 1.44 percent of its 13F equity portfolio to GPI.
As aggregate interest increased, key hedge funds were breaking ground themselves. Renaissance Technologies, created the largest position in Group 1 Automotive, Inc. (NYSE:GPI). Renaissance Technologies had $7 million invested in the company at the end of the quarter. Brad Stephens’s Six Columns Capital also initiated a $6.1 million position during the quarter. The other funds with new positions in the stock are Travis Cocke’s Voss Capital, Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital, and D. E. Shaw’s D E Shaw.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Group 1 Automotive, Inc. (NYSE:GPI) but similarly valued. These stocks are Lakeland Financial Corporation (NASDAQ:LKFN), Niu Technologies (NASDAQ:NIU), Helios Technologies, Inc. (NASDAQ:HLIO), Model N Inc (NYSE:MODN), Smith & Wesson Brands, Inc. (NASDAQ:SWBI), Banco Macro SA (NYSE:BMA), and Veoneer, Inc. (NYSE:VNE). This group of stocks’ market caps are closest to GPI’s market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LKFN,5,13623,-4 NIU,8,77561,3 HLIO,9,55671,5 MODN,18,153308,2 SWBI,24,143917,2 BMA,11,77409,3 VNE,14,99577,3 Average,12.7,88724,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.7 hedge funds with bullish positions and the average amount invested in these stocks was $89 million. That figure was $162 million in GPI’s case. Smith & Wesson Brands, Inc. (NASDAQ:SWBI) is the most popular stock in this table. On the other hand Lakeland Financial Corporation (NASDAQ:LKFN) is the least popular one with only 5 bullish hedge fund positions. Group 1 Automotive, Inc. (NYSE:GPI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GPI is 77.3. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 24.8% in 2020 through the end of third quarter and still beat the market by 19.3 percentage points. Hedge funds were also right about betting on GPI as the stock returned 34% during Q3 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.