We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 835 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article we look at what those investors think of Graco Inc. (NYSE:GGG).
Is Graco Inc. (NYSE:GGG) a buy, sell, or hold? The smart money is getting less optimistic. The number of long hedge fund positions shrunk by 1 in recent months. Our calculations also showed that GGG 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).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Michael Hintze of CQS Cayman LP
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. 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. Now let’s view the recent hedge fund action surrounding Graco Inc. (NYSE:GGG).
What have hedge funds been doing with Graco Inc. (NYSE:GGG)?
At Q4’s end, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from the previous quarter. By comparison, 18 hedge funds held shares or bullish call options in GGG a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
More specifically, GAMCO Investors was the largest shareholder of Graco Inc. (NYSE:GGG), with a stake worth $97.7 million reported as of the end of September. Trailing GAMCO Investors was Millennium Management, which amassed a stake valued at $23.7 million. GLG Partners, Citadel Investment Group, and Hosking Partners 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 Selz Capital allocated the biggest weight to Graco Inc. (NYSE:GGG), around 1.37% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, earmarking 0.78 percent of its 13F equity portfolio to GGG.
Due to the fact that Graco Inc. (NYSE:GGG) has faced a decline in interest from hedge fund managers, logic holds that there were a few money managers who were dropping their positions entirely by the end of the third quarter. At the top of the heap, Phill Gross and Robert Atchinson’s Adage Capital Management said goodbye to the largest stake of all the hedgies monitored by Insider Monkey, valued at about $10.1 million in stock. Renaissance Technologies, also dropped its stock, about $8.3 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 1 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Graco Inc. (NYSE:GGG) but similarly valued. These stocks are Under Armour Inc (NYSE:UA), RenaissanceRe Holdings Ltd. (NYSE:RNR), Cypress Semiconductor Corporation (NASDAQ:CY), and PTC Inc (NASDAQ:PTC). This group of stocks’ market values resemble GGG’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UA | 32 | 1014322 | -2 |
| RNR | 23 | 765361 | 5 |
| CY | 36 | 1441339 | 1 |
| PTC | 35 | 1101313 | 5 |
| Average | 31.5 | 1080584 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.5 hedge funds with bullish positions and the average amount invested in these stocks was $1081 million. That figure was $235 million in GGG’s case. Cypress Semiconductor Corporation (NASDAQ:CY) is the most popular stock in this table. On the other hand RenaissanceRe Holdings Ltd. (NYSE:RNR) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks Graco Inc. (NYSE:GGG) is even less popular than RNR. Hedge funds clearly dropped the ball on GGG as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but still beat the market by 3.2 percentage points. A small number of hedge funds were also right about betting on GGG as the stock returned -18% during the same time period and outperformed the market by an even larger margin.
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.
