Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about GATX Corporation (NYSE:GATX).
Is GATX a good stock to buy now? GATX Corporation (NYSE:GATX) has experienced a decrease in support from the world’s most elite money managers lately. GATX Corporation (NYSE:GATX) was in 10 hedge funds’ portfolios at the end of September. The all time high for this statistics is 21. There were 17 hedge funds in our database with GATX holdings at the end of June. Our calculations also showed that GATX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Michael Gelband of ExodusPoint Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we’re going to take a gander at the latest hedge fund action encompassing GATX Corporation (NYSE:GATX).
Do Hedge Funds Think GATX Is A Good Stock To Buy Now?
At third quarter’s end, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of -41% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in GATX over the last 21 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in GATX Corporation (NYSE:GATX) was held by GAMCO Investors, which reported holding $121.5 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $6.1 million position. Other investors bullish on the company included Scopus Asset Management, Millennium Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position GAMCO Investors allocated the biggest weight to GATX Corporation (NYSE:GATX), around 1.35% of its 13F portfolio. Skylands Capital is also relatively very bullish on the stock, earmarking 0.27 percent of its 13F equity portfolio to GATX.
Because GATX Corporation (NYSE:GATX) has faced declining sentiment from the aggregate hedge fund industry, it’s easy to see that there exists a select few funds that elected to cut their entire stakes in the third quarter. It’s worth mentioning that D. E. Shaw’s D E Shaw dumped the largest stake of the “upper crust” of funds followed by Insider Monkey, worth an estimated $1.6 million in stock, and Michael Gelband’s ExodusPoint Capital was right behind this move, as the fund said goodbye to about $1 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 7 funds in the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as GATX Corporation (NYSE:GATX) but similarly valued. We will take a look at Pactiv Evergreen Inc. (NASDAQ:PTVE), Xencor Inc (NASDAQ:XNCR), Shenandoah Telecommunications Company (NASDAQ:SHEN), Golub Capital BDC Inc (NASDAQ:GBDC), Glaukos Corporation (NYSE:GKOS), WESCO International, Inc. (NYSE:WCC), and LivaNova PLC (NASDAQ:LIVN). This group of stocks’ market values are closest to GATX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PTVE | 15 | 54939 | 15 |
| XNCR | 18 | 301062 | -1 |
| SHEN | 9 | 85112 | 1 |
| GBDC | 11 | 33376 | -5 |
| GKOS | 15 | 126038 | -3 |
| WCC | 29 | 612264 | -5 |
| LIVN | 26 | 290777 | -3 |
| Average | 17.6 | 214795 | -0.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.6 hedge funds with bullish positions and the average amount invested in these stocks was $215 million. That figure was $144 million in GATX’s case. WESCO International, Inc. (NYSE:WCC) is the most popular stock in this table. On the other hand Shenandoah Telecommunications Company (NASDAQ:SHEN) is the least popular one with only 9 bullish hedge fund positions. GATX Corporation (NYSE:GATX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for GATX is 14.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on GATX as the stock returned 35.8% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
