GP Strategies Corp (GPX): Are Hedge Funds Right About This Stock?

The successful funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at GP Strategies Corp (NYSE:GPX) from the perspective of those successful funds.

GP Strategies Corp (NYSE:GPX) was in 13 hedge funds’ portfolios at the end of September. GPX has seen an increase in activity from the world’s largest hedge funds of late. There were 10 hedge funds in our database with GPX holdings at the end of the previous quarter. At the end of this article we will also compare GPX to other stocks including FairPoint Communications Inc (NASDAQ:FRP), The Rubicon Project Inc (NYSE:RUBI), and Celldex Therapeutics, Inc. (NASDAQ:CLDX) to get a better sense of its popularity.

We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.

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What have hedge funds been doing with GP Strategies Corp (NYSE:GPX)?

At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, up by 30% from one quarter earlier. By comparison, 9 hedge funds held shares or bullish call options in GPX heading into this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Sagard Capital Partners Management Corp, led by Dan Friedberg, holds the biggest position in GP Strategies Corp (NYSE:GPX). Sagard Capital Partners Management Corp has a $88.2 million position in the stock, comprising 32.3% of its 13F portfolio. On Sagard Capital Partners Management Corp’s heels is Jeffrey Bronchick of Cove Street Capital, with a $29 million position; the fund has 3.1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions consist of Phil Frohlich’s Prescott Group Capital Management, Chuck Royce’s Royce & Associates and Paul Hondros’ AlphaOne Capital Partners. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

As aggregate interest increased, some big names have been driving this bullishness. Cove Street Capital created the most outsized position in GP Strategies Corp (NYSE:GPX). Ken Griffin’s Citadel Investment Group also initiated a $0.8 million position during the quarter. The only other fund with a new position in the stock is Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.

Let’s go over hedge fund activity in other stocks similar to GP Strategies Corp (NYSE:GPX). These stocks are FairPoint Communications Inc (NASDAQ:FRP), The Rubicon Project Inc (NYSE:RUBI), Celldex Therapeutics, Inc. (NASDAQ:CLDX), and On Deck Capital Inc (NYSE:ONDK). All of these stocks’ market caps resemble GPX’s market cap.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $78 million. That figure was $138 million in GPX’s case. The Rubicon Project Inc (NYSE:RUBI) is the most popular stock in this table. On the other hand Celldex Therapeutics, Inc. (NASDAQ:CLDX) is the least popular one with only 10 bullish hedge fund positions. GP Strategies Corp (NYSE:GPX) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard RUBI might be a better candidate to consider taking a long position in.

Disclosure: None