At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
Graham Corporation (NYSE:GHM) investors should pay attention to an increase in activity from the world’s largest hedge funds lately. There were 7 hedge funds in our database with GHM holdings at the end of the second quarter, which rose to 8 by the end of the third 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 Veritex Holdings Inc (NASDAQ:VBTX), Alliance One International, Inc. (NYSE:AOI), and Southern Missouri Bancorp, Inc. (NASDAQ:SMBC) to gather more data points.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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What have hedge funds been doing with Graham Corporation (NYSE:GHM)?
At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a gain of 14% from the previous quarter. By comparison, 8 hedge funds held shares or bullish call options in GHM heading into this year, so sentiment is flat for the year. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Bryant Regan’s Lafitte Capital Management holds the number one position in Graham Corporation (NYSE:GHM). Lafitte Capital Management has a $9.6 million position in the stock, comprising 5.4% of its 13F portfolio. The second most bullish fund manager is Chuck Royce’s Royce & Associates, which holds a $4.7 million position. Other hedge funds and institutional investors with similar optimism comprise Renaissance Technologies, one of the largest hedge funds in the world, David E. Shaw’s D E Shaw, and Charles Frumberg’s Emancipation Capital. 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-micro-cap stocks.
Consequently, key money managers have jumped into Graham Corporation (NYSE:GHM) headfirst. Jeffrey Bronchick’s Cove Street Capital initiated the largest position in Graham Corporation (NYSE:GHM). Cove Street Capital had $0.8 million invested in the company at the end of the quarter.
Let’s go over hedge fund activity in other stocks similar to Graham Corporation (NYSE:GHM). These stocks are Veritex Holdings Inc (NASDAQ:VBTX), Alliance One International, Inc. (NYSE:AOI), Southern Missouri Bancorp, Inc. (NASDAQ:SMBC), and Solar Senior Capital Ltd (NASDAQ:SUNS). This group of stocks’ market values resemble GHM’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VBTX | 6 | 26307 | -1 |
| AOI | 5 | 24899 | -2 |
| SMBC | 2 | 3732 | -1 |
| SUNS | 4 | 9144 | 4 |
As you can see these stocks had an average of 4 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $23 million in GHM’s case. Veritex Holdings Inc (NASDAQ:VBTX) is the most popular stock in this table. On the other hand Southern Missouri Bancorp, Inc. (NASDAQ:SMBC) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Graham Corporation (NYSE:GHM) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None