Is Garmin Ltd. (NASDAQ:GRMN) a good bet right now? We like to analyze hedge fund sentiment before doing days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy league graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Garmin Ltd. (NASDAQ:GRMN) was in 27 hedge funds’ portfolios at the end of September. GRMN has seen an increase in enthusiasm from smart money of late. There were 25 hedge funds in our database with GRMN holdings at the end of the previous quarter. Our calculations also showed that GRMN isn’t among the 30 most popular stocks among hedge funds.
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 market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Cliff Asness of AQR Capital Management
Let’s take a peek at the recent hedge fund action surrounding Garmin Ltd. (NASDAQ:GRMN).
How are hedge funds trading Garmin Ltd. (NASDAQ:GRMN)?
Heading into the fourth quarter of 2018, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in GRMN over the last 13 quarters. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, AQR Capital Management, managed by Cliff Asness, holds the number one position in Garmin Ltd. (NASDAQ:GRMN). AQR Capital Management has a $43 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Select Equity Group, led by Robert Joseph Caruso, holding a $39.1 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism comprise Ken Griffin’s Citadel Investment Group, Dmitry Balyasny’s Balyasny Asset Management and Joel Greenblatt’s Gotham Asset Management.
With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. Element Capital Management, managed by Jeffrey Talpins, established the biggest position in Garmin Ltd. (NASDAQ:GRMN). Element Capital Management had $3.5 million invested in the company at the end of the quarter. Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital also initiated a $0.1 million position during the quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Garmin Ltd. (NASDAQ:GRMN) but similarly valued. These stocks are Symantec Corporation (NASDAQ:SYMC), Old Dominion Freight Line, Inc. (NASDAQ:ODFL), AEGON N.V. (NYSE:AEG), and CarMax Inc (NYSE:KMX). This group of stocks’ market valuations are closest to GRMN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SYMC | 33 | 1466884 | 8 |
| ODFL | 24 | 253269 | 4 |
| AEG | 7 | 45622 | 3 |
| KMX | 31 | 1755991 | 0 |
| Average | 23.75 | 880442 | 3.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.75 hedge funds with bullish positions and the average amount invested in these stocks was $880 million. That figure was $307 million in GRMN’s case. Symantec Corporation (NASDAQ:SYMC) is the most popular stock in this table. On the other hand AEGON N.V. (NYSE:AEG) is the least popular one with only 7 bullish hedge fund positions. Garmin Ltd. (NASDAQ:GRMN) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard SYMC might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
