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 Gartner Inc (NYSE:IT).
Gartner Inc (NYSE:IT) shareholders have witnessed an increase in enthusiasm from smart money recently. Our calculations also showed that IT isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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.
Philippe Laffont of Coatue Management
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. With all of this in mind we’re going to take a look at the fresh hedge fund action regarding Gartner Inc (NYSE:IT).
Hedge fund activity in Gartner Inc (NYSE:IT)
At Q4’s end, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards IT over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Bares Capital Management, managed by Brian Bares, holds the largest position in Gartner Inc (NYSE:IT). Bares Capital Management has a $370.4 million position in the stock, comprising 10.4% of its 13F portfolio. Sitting at the No. 2 spot is Holocene Advisors, managed by Brandon Haley, which holds a $157 million position; the fund has 1.4% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions encompass Gabriel Plotkin’s Melvin Capital Management, Jeremy Hosking’s Hosking Partners and Joe Milano’s Greenhouse Funds. In terms of the portfolio weights assigned to each position Bares Capital Management allocated the biggest weight to Gartner Inc (NYSE:IT), around 10.39% of its 13F portfolio. Greenhouse Funds is also relatively very bullish on the stock, setting aside 3.25 percent of its 13F equity portfolio to IT.
Consequently, key money managers were leading the bulls’ herd. Millennium Management, managed by Israel Englander, created the most valuable position in Gartner Inc (NYSE:IT). Millennium Management had $12 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also initiated a $5.4 million position during the quarter. The following funds were also among the new IT investors: John Overdeck and David Siegel’s Two Sigma Advisors, Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, and Philippe Laffont’s Coatue Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Gartner Inc (NYSE:IT) but similarly valued. These stocks are Liberty Global Plc (NASDAQ:LBTYK), International Flavors & Fragrances Inc (NYSE:IFF), Zebra Technologies Corporation (NASDAQ:ZBRA), and Masco Corporation (NYSE:MAS). This group of stocks’ market values resemble IT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LBTYK | 44 | 3362668 | 0 |
| IFF | 28 | 290762 | 6 |
| ZBRA | 34 | 614256 | 15 |
| MAS | 45 | 948362 | -6 |
| Average | 37.75 | 1304012 | 3.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 37.75 hedge funds with bullish positions and the average amount invested in these stocks was $1304 million. That figure was $727 million in IT’s case. Masco Corporation (NYSE:MAS) is the most popular stock in this table. On the other hand International Flavors & Fragrances Inc (NYSE:IFF) is the least popular one with only 28 bullish hedge fund positions. Compared to these stocks Gartner Inc (NYSE:IT) is even less popular than IFF. Hedge funds dodged a bullet by taking a bearish stance towards IT. Our calculations showed that the top 20 most popular hedge fund stocks 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 managed to beat the market by 3.2 percentage points. Unfortunately IT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); IT investors were disappointed as the stock returned -39.8% 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 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in Q1.
Disclosure: None. This article was originally published at Insider Monkey.
