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. Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the fourth quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4 years and analyze what the smart money thinks of Gentex Corporation (NASDAQ:GNTX) based on that data.
Is Gentex Corporation (NASDAQ:GNTX) undervalued? Hedge funds are becoming less confident. The number of long hedge fund bets went down by 1 in recent months. Our calculations also showed that GNTX 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.
Phill Gross of Adage Capital 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. Now we’re going to review the fresh hedge fund action regarding Gentex Corporation (NASDAQ:GNTX).
What does smart money think about Gentex Corporation (NASDAQ:GNTX)?
At Q4’s end, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from one quarter earlier. On the other hand, there were a total of 23 hedge funds with a bullish position in GNTX 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.
More specifically, Arrowstreet Capital was the largest shareholder of Gentex Corporation (NASDAQ:GNTX), with a stake worth $100.4 million reported as of the end of September. Trailing Arrowstreet Capital was Renaissance Technologies, which amassed a stake valued at $93.7 million. Adage Capital Management, Nitorum Capital, and Point72 Asset Management 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 Nitorum Capital allocated the biggest weight to Gentex Corporation (NASDAQ:GNTX), around 4.77% of its 13F portfolio. Motley Fool Asset Management is also relatively very bullish on the stock, earmarking 0.93 percent of its 13F equity portfolio to GNTX.
Judging by the fact that Gentex Corporation (NASDAQ:GNTX) has witnessed falling interest from the aggregate hedge fund industry, it’s safe to say that there exists a select few funds that elected to cut their positions entirely by the end of the third quarter. At the top of the heap, Matthew Hulsizer’s PEAK6 Capital Management dropped the largest investment of the “upper crust” of funds monitored by Insider Monkey, comprising close to $3.4 million in stock, and Qing Li’s Sciencast Management was right behind this move, as the fund cut about $1.4 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 1 funds by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Gentex Corporation (NASDAQ:GNTX) but similarly valued. We will take a look at Steel Dynamics, Inc. (NASDAQ:STLD), 10x Genomics, Inc. (NASDAQ:TXG), Donaldson Company, Inc. (NYSE:DCI), and Woori Financial Group Inc. (NYSE:WF). This group of stocks’ market valuations are similar to GNTX’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| STLD | 35 | 506217 | 6 |
| TXG | 12 | 172329 | -7 |
| DCI | 21 | 175314 | -3 |
| WF | 3 | 3750 | 0 |
| Average | 17.75 | 214403 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $214 million. That figure was $616 million in GNTX’s case. Steel Dynamics, Inc. (NASDAQ:STLD) is the most popular stock in this table. On the other hand Woori Financial Group Inc. (NYSE:WF) is the least popular one with only 3 bullish hedge fund positions. Gentex Corporation (NASDAQ:GNTX) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on GNTX as the stock returned -21.6% during the first quarter (through March 16th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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.
