Is Gerdau SA (ADR) (NYSE:GGB) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, expert networks, and get tips from industry insiders. They fail miserably sometimes but historically their consensus stock picks outperformed the market after adjusting for known risk factors.
Gerdau SA (ADR) (NYSE:GGB) shareholders have witnessed a decrease in enthusiasm from smart money lately. GGB was in 11 hedge funds’ portfolios at the end of the third quarter of 2016. There were 13 hedge funds in our database with GGB holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Blue Buffalo Pet Products Inc (NASDAQ:BUFF), Enel Chile SA – ADR(NYSE:ENIC), and HEICO Corporation (NYSE:HEI) to gather more data points.
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What have hedge funds been doing with Gerdau SA (ADR) (NYSE:GGB)?
At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, down by 15% from the second quarter of 2016. On the other hand, there were a total of 10 hedge funds with a bullish position in GGB at the beginning of this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Renaissance Technologies, one of the largest hedge funds in the world,, holds the number one position in Gerdau SA (ADR) (NYSE:GGB). Renaissance Technologies has a $59.8 million position in the stock. Coming in second is Contrarian Capital, led by Jon Bauer, holding a $29.2 million position; 13.9% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors with similar optimism encompass Howard Marks’ Oaktree Capital Management, Israel Englander’s Millennium Management and Glenn Russell Dubin’s Highbridge Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Seeing as Gerdau SA (ADR) (NYSE:GGB) has gone through falling interest from the smart money, it’s easy to see that there lies a certain “tier” of fund managers who sold off their entire stakes last quarter. Interestingly, Phill Gross and Robert Atchinson’s Adage Capital Management sold off the biggest investment of all the investors monitored by Insider Monkey, comprising about $21.6 million in stock, and Jon Bauer’s Contrarian Capital was right behind this move, as the fund dropped about $0.5 million worth of shares.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Gerdau SA (ADR) (NYSE:GGB) but similarly valued. We will take a look at Blue Buffalo Pet Products Inc (NASDAQ:BUFF), Enel Chile SA – ADR (NYSE:ENIC), HEICO Corporation (NYSE:HEI), and Bank Of The Ozarks Inc (NASDAQ:OZRK). All of these stocks’ market caps are closest to GGB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BUFF | 28 | 309153 | 2 |
| ENIC | 5 | 17839 | -1 |
| HEI | 20 | 380440 | -3 |
| OZRK | 22 | 365278 | 6 |
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $268 million. That figure was $118 million in GGB’s case. Blue Buffalo Pet Products Inc (NASDAQ:BUFF) is the most popular stock in this table. On the other hand Enel Chile SA – ADR(NYSE:ENIC) is the least popular one with only 5 bullish hedge fund positions. Gerdau SA (ADR) (NYSE:GGB) 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 BUFF might be a better candidate to consider taking a long position in.
