Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Gartner Inc (NYSE:IT).
Is Gartner Inc (NYSE:IT) the right investment to pursue these days? Investors who are in the know are betting on the stock. The number of bullish hedge fund positions rose by 6 lately. Our calculations also showed that IT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). IT was in 32 hedge funds’ portfolios at the end of the first quarter of 2020. There were 26 hedge funds in our database with IT holdings at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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’ 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 S&P 500 ETFs by 51 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 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.
Gabriel Plotkin of Melvin Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a glance at the key hedge fund action surrounding Gartner Inc (NYSE:IT).
Hedge fund activity in Gartner Inc (NYSE:IT)
Heading into the second quarter of 2020, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 23% from the previous quarter. By comparison, 15 hedge funds held shares or bullish call options in IT a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Generation Investment Management, managed by David Blood and Al Gore, holds the biggest position in Gartner Inc (NYSE:IT). Generation Investment Management has a $396.5 million position in the stock, comprising 2.8% of its 13F portfolio. The second most bullish fund manager is Bares Capital Management, led by Brian Bares, holding a $251.3 million position; the fund has 9.1% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism consist of Gabriel Plotkin’s Melvin Capital Management, Ken Griffin’s Citadel Investment Group and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Bares Capital Management allocated the biggest weight to Gartner Inc (NYSE:IT), around 9.06% of its 13F portfolio. Greenhouse Funds is also relatively very bullish on the stock, designating 4.2 percent of its 13F equity portfolio to IT.
As one would reasonably expect, some big names have been driving this bullishness. Generation Investment Management, managed by David Blood and Al Gore, initiated the biggest position in Gartner Inc (NYSE:IT). Generation Investment Management had $396.5 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also made a $36.3 million investment in the stock during the quarter. The other funds with brand new IT positions are Paul Marshall and Ian Wace’s Marshall Wace LLP, Edward Goodnow’s Goodnow Investment Group, and Dmitry Balyasny’s Balyasny Asset Management.
Let’s check out hedge fund activity in other stocks similar to Gartner Inc (NYSE:IT). We will take a look at Pinterest, Inc. (NYSE:PINS), GDS Holdings Limited (NASDAQ:GDS), CarMax Inc (NYSE:KMX), and Raymond James Financial, Inc. (NYSE:RJF). All of these stocks’ market caps resemble IT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PINS | 38 | 410292 | 1 |
| GDS | 41 | 1618404 | 7 |
| KMX | 37 | 1084332 | -13 |
| RJF | 31 | 441370 | 3 |
| Average | 36.75 | 888600 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.75 hedge funds with bullish positions and the average amount invested in these stocks was $889 million. That figure was $973 million in IT’s case. GDS Holdings Limited (NASDAQ:GDS) is the most popular stock in this table. On the other hand Raymond James Financial, Inc. (NYSE:RJF) is the least popular one with only 31 bullish hedge fund positions. Gartner Inc (NYSE:IT) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on IT as the stock returned 22.2% during the second quarter and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
