Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying for a while now that the current market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the fourth quarter, many investors lost money due to unpredictable events such as the sudden increase in long-term interest rates and unintended consequences of the trade war with China. Nevertheless, many of the stocks that tanked in the third quarter still sport strong fundamentals and their decline was more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Quad/Graphics, Inc. (NYSE:QUAD) changed recently.
Is Quad/Graphics, Inc. (NYSE:QUAD) ready to rally soon? The smart money is in a bullish mood. The number of long hedge fund positions inched up by 1 lately. Our calculations also showed that quad isn’t among the 30 most popular stocks among hedge funds. QUAD was in 13 hedge funds’ portfolios at the end of September. There were 12 hedge funds in our database with QUAD holdings at the end of the previous quarter.
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to review the latest hedge fund action encompassing Quad/Graphics, Inc. (NYSE:QUAD).
How are hedge funds trading Quad/Graphics, Inc. (NYSE:QUAD)?
Heading into the fourth quarter of 2018, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from one quarter earlier. On the other hand, there were a total of 17 hedge funds with a bullish position in QUAD at the beginning of this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Quad/Graphics, Inc. (NYSE:QUAD), with a stake worth $15.6 million reported as of the end of September. Trailing Renaissance Technologies was D E Shaw, which amassed a stake valued at $3.4 million. Two Sigma Advisors, Citadel Investment Group, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
Consequently, key hedge funds have jumped into Quad/Graphics, Inc. (NYSE:QUAD) headfirst. Citadel Investment Group, managed by Ken Griffin, established the most outsized call position in Quad/Graphics, Inc. (NYSE:QUAD). Citadel Investment Group had $0.3 million invested in the company at the end of the quarter. Alec Litowitz and Ross Laser’s Magnetar Capital also made a $0.3 million investment in the stock during the quarter.
Let’s go over hedge fund activity in other stocks similar to Quad/Graphics, Inc. (NYSE:QUAD). These stocks are Alamo Group, Inc. (NYSE:ALG), GoPro Inc (NASDAQ:GPRO), Iovance Biotherapeutics, Inc. (NASDAQ:IOVA), and LGI Homes Inc (NASDAQ:LGIH). All of these stocks’ market caps resemble QUAD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ALG | 13 | 199431 | 0 |
| GPRO | 14 | 101985 | 0 |
| IOVA | 27 | 512208 | 7 |
| LGIH | 12 | 65359 | 2 |
| Average | 16.5 | 219746 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $220 million. That figure was $29 million in QUAD’s case. Iovance Biotherapeutics, Inc. (NASDAQ:IOVA) is the most popular stock in this table. On the other hand LGI Homes Inc (NASDAQ:LGIH) is the least popular one with only 12 bullish hedge fund positions. Quad/Graphics, Inc. (NYSE:QUAD) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard IOVA might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
