Will the new coronavirus cause a recession in US in the next 6 months? On February 27th, we put the probability at 75% and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Granite Construction Incorporated (NYSE:GVA).
Is Granite Construction Incorporated (NYSE:GVA) ready to rally soon? Prominent investors are in a pessimistic mood. The number of bullish hedge fund positions retreated by 6 lately. Our calculations also showed that GVA isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Nelson Obus of Wynnefield Capital
We leave no stone unturned when looking for the next great investment idea. For example, COVID-19 pandemic is still the main driver of stock prices. So we are checking out this trader’s corona catalyst trades. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a look at the fresh hedge fund action surrounding Granite Construction Incorporated (NYSE:GVA).
What does smart money think about Granite Construction Incorporated (NYSE:GVA)?
Heading into the first quarter of 2020, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -46% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in GVA over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Headlands Capital held the most valuable stake in Granite Construction Incorporated (NYSE:GVA), which was worth $9.8 million at the end of the third quarter. On the second spot was Rutabaga Capital Management which amassed $6.6 million worth of shares. Wynnefield Capital, PEAK6 Capital Management, and GAMCO Investors 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 Headlands Capital allocated the biggest weight to Granite Construction Incorporated (NYSE:GVA), around 6.46% of its 13F portfolio. Wynnefield Capital is also relatively very bullish on the stock, dishing out 4.31 percent of its 13F equity portfolio to GVA.
Because Granite Construction Incorporated (NYSE:GVA) has witnessed bearish sentiment from the smart money, it’s easy to see that there was a specific group of hedgies who sold off their positions entirely in the third quarter. At the top of the heap, Israel Englander’s Millennium Management sold off the biggest stake of the “upper crust” of funds followed by Insider Monkey, worth an estimated $3.3 million in stock, and T Boone Pickens’s BP Capital was right behind this move, as the fund said goodbye to about $1.5 million worth. These moves are important to note, as total hedge fund interest fell by 6 funds in the third quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Granite Construction Incorporated (NYSE:GVA) but similarly valued. These stocks are OceanFirst Financial Corp. (NASDAQ:OCFC), AtriCure Inc. (NASDAQ:ATRC), Perdoceo Education Corporation (NASDAQ:PRDO), and Oxford Industries, Inc. (NYSE:OXM). This group of stocks’ market caps are similar to GVA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OCFC | 15 | 61691 | 1 |
| ATRC | 18 | 137350 | -2 |
| PRDO | 19 | 266027 | -5 |
| OXM | 12 | 71551 | -3 |
| Average | 16 | 134155 | -2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $134 million. That figure was $25 million in GVA’s case. Perdoceo Education Corporation (NASDAQ:PRDO) is the most popular stock in this table. On the other hand Oxford Industries, Inc. (NYSE:OXM) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Granite Construction Incorporated (NYSE:GVA) is even less popular than OXM. Hedge funds dodged a bullet by taking a bearish stance towards GVA. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.0% in 2020 through May 1st but managed to beat the market by 12.9 percentage points. Unfortunately GVA wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); GVA investors were disappointed as the stock returned -43.6% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
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.
