Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before last year’s Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Gentex Corporation (NASDAQ:GNTX) changed recently.
Gentex Corporation (NASDAQ:GNTX) was in 28 hedge funds’ portfolios at the end of the third quarter of 2019. GNTX shareholders have witnessed an increase in hedge fund sentiment of late. There were 23 hedge funds in our database with GNTX positions at the end of the previous quarter. Our calculations also showed that GNTX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Chuck Royce of Royce & Associates
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind we’re going to go over the latest hedge fund action regarding Gentex Corporation (NASDAQ:GNTX).
What does smart money think about Gentex Corporation (NASDAQ:GNTX)?
Heading into the fourth quarter of 2019, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards GNTX over the last 17 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, Adage Capital Management was the largest shareholder of Gentex Corporation (NASDAQ:GNTX), with a stake worth $103.3 million reported as of the end of September. Trailing Adage Capital Management was Nitorum Capital, which amassed a stake valued at $88 million. Renaissance Technologies, Royce & Associates, and Arrowstreet Capital 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 Nitorum Capital allocated the biggest weight to Gentex Corporation (NASDAQ:GNTX), around 5.12% of its 13F portfolio. Sprott Asset Management is also relatively very bullish on the stock, setting aside 1.12 percent of its 13F equity portfolio to GNTX.
As industrywide interest jumped, key hedge funds have been driving this bullishness. PEAK6 Capital Management, managed by Matthew Hulsizer, assembled the largest call position in Gentex Corporation (NASDAQ:GNTX). PEAK6 Capital Management had $3.4 million invested in the company at the end of the quarter. Renee Yao’s Neo Ivy Capital also made a $1.3 million investment in the stock during the quarter. The following funds were also among the new GNTX investors: John Overdeck and David Siegel’s Two Sigma Advisors, David Harding’s Winton Capital Management, and Joel Greenblatt’s Gotham Asset Management.
Let’s go over hedge fund activity in other stocks similar to Gentex Corporation (NASDAQ:GNTX). These stocks are Five Below Inc (NASDAQ:FIVE), Hexcel Corporation (NYSE:HXL), Alteryx, Inc. (NYSE:AYX), and Catalent Inc (NYSE:CTLT). All of these stocks’ market caps resemble GNTX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FIVE | 34 | 469205 | -4 |
| HXL | 26 | 122315 | 3 |
| AYX | 44 | 1334248 | 6 |
| CTLT | 27 | 392969 | 7 |
| Average | 32.75 | 579684 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.75 hedge funds with bullish positions and the average amount invested in these stocks was $580 million. That figure was $469 million in GNTX’s case. Alteryx, Inc. (NYSE:AYX) is the most popular stock in this table. On the other hand Hexcel Corporation (NYSE:HXL) is the least popular one with only 26 bullish hedge fund positions. Gentex Corporation (NASDAQ:GNTX) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. A small number of hedge funds were also right about betting on GNTX as the stock returned 45.9% in 2019 through December 23rd and outperformed the market by an even larger margin.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
