Technology stocks had a lousy start to 2022. QQQ lost 9% of its value in January. Pandemic winners are getting crushed while energy stocks are surging. Roblox lost 36%, Moderna lost 33%, and Carvana and Shopify lost 30% of their values in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards Gartner Inc (NYSE:IT) at the end of the third quarter and determine whether the smart money was really smart about this stock.
Gartner Inc (NYSE:IT) shareholders have witnessed a decrease in activity from the world’s largest hedge funds of late. Gartner Inc (NYSE:IT) was in 33 hedge funds’ portfolios at the end of September. The all time high for this statistic is 40. Our calculations also showed that IT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Now we’re going to view the fresh hedge fund action surrounding Gartner Inc (NYSE:IT).
David Blood of Generation Investment Management
Do Hedge Funds Think IT Is A Good Stock To Buy Now?
At third quarter’s end, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -15% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in IT over the last 25 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Generation Investment Management was the largest shareholder of Gartner Inc (NYSE:IT), with a stake worth $856.9 million reported as of the end of September. Trailing Generation Investment Management was Alkeon Capital Management, which amassed a stake valued at $371.6 million. Melvin Capital Management, Citadel Investment Group, 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 Goodnow Investment Group allocated the biggest weight to Gartner Inc (NYSE:IT), around 4.37% of its 13F portfolio. Generation Investment Management is also relatively very bullish on the stock, designating 3.56 percent of its 13F equity portfolio to IT.
Because Gartner Inc (NYSE:IT) has faced falling interest from the smart money, we can see that there was a specific group of funds that slashed their full holdings by the end of the third quarter. Intriguingly, Gabriel Plotkin’s Melvin Capital Management said goodbye to the biggest stake of the “upper crust” of funds followed by Insider Monkey, worth about $121.1 million in stock. Jack Woodruff’s fund, Candlestick Capital Management, also dropped its stock, about $109 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 6 funds by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Gartner Inc (NYSE:IT). We will take a look at United Rentals, Inc. (NYSE:URI), ZTO Express (Cayman) Inc. (NYSE:ZTO), Bilibili Inc. (NASDAQ:BILI), Fortive Corporation (NYSE:FTV), Realty Income Corporation (NYSE:O), Coca-Cola Europacific Partners plc (NASDAQ:CCEP), and Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (NYSE:TLK). This group of stocks’ market valuations are closest to IT’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| URI | 37 | 1382415 | -10 |
| ZTO | 20 | 1019859 | -1 |
| BILI | 35 | 1509730 | -12 |
| FTV | 32 | 2130115 | 1 |
| O | 22 | 275031 | -1 |
| CCEP | 32 | 1192664 | 1 |
| TLK | 4 | 170252 | -1 |
| Average | 26 | 1097152 | -3.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $1097 million. That figure was $2040 million in IT’s case. United Rentals, Inc. (NYSE:URI) is the most popular stock in this table. On the other hand Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (NYSE:TLK) is the least popular one with only 4 bullish hedge fund positions. Gartner Inc (NYSE:IT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for IT is 67.7. 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 positive signal but 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 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately, IT wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on IT were disappointed as the stock returned -3.3% since the end of September (through 1/31) 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 all of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
