The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing more than 750 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of September 30th, 2019. What do these smart investors think about Gerdau SA (NYSE:GGB)?
Is Gerdau SA (NYSE:GGB) a healthy stock for your portfolio? The best stock pickers are taking an optimistic view. The number of long hedge fund bets rose by 2 in recent months. Our calculations also showed that GGB isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). GGB was in 9 hedge funds’ portfolios at the end of the third quarter of 2019. There were 7 hedge funds in our database with GGB positions at the end of the previous quarter.
Video: Click the image to 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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Ken Fisher of Fisher Asset Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a look at the latest hedge fund action encompassing Gerdau SA (NYSE:GGB).
How have hedgies been trading Gerdau SA (NYSE:GGB)?
At Q3’s end, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 29% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in GGB over the last 17 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Contrarian Capital, managed by Jon Bauer, holds the largest position in Gerdau SA (NYSE:GGB). Contrarian Capital has a $67 million position in the stock, comprising 6.1% of its 13F portfolio. Sitting at the No. 2 spot is Ken Fisher of Fisher Asset Management, with a $21 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other peers that are bullish contain Ken Griffin’s Citadel Investment Group, Cliff Asness’s AQR Capital Management and Matthew Hulsizer’s PEAK6 Capital Management. In terms of the portfolio weights assigned to each position Contrarian Capital allocated the biggest weight to Gerdau SA (NYSE:GGB), around 6.11% of its 13F portfolio. Indus Capital is also relatively very bullish on the stock, designating 0.2 percent of its 13F equity portfolio to GGB.
Now, key money managers were leading the bulls’ herd. D E Shaw, managed by David E. Shaw, initiated the largest position in Gerdau SA (NYSE:GGB). D E Shaw had $0.1 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $0.1 million investment in the stock during the quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Gerdau SA (NYSE:GGB) but similarly valued. These stocks are Huntsman Corporation (NYSE:HUN), SmileDirectClub, Inc. (NASDAQ:SDC), Primerica, Inc. (NYSE:PRI), and Aluminum Corp. of China Limited (NYSE:ACH). This group of stocks’ market valuations are similar to GGB’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HUN | 28 | 394601 | -2 |
| SDC | 28 | 287514 | 28 |
| PRI | 23 | 340762 | -3 |
| ACH | 3 | 4206 | -2 |
| Average | 20.5 | 256771 | 5.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $257 million. That figure was $95 million in GGB’s case. Huntsman Corporation (NYSE:HUN) is the most popular stock in this table. On the other hand Aluminum Corp. of China Limited (NYSE:ACH) is the least popular one with only 3 bullish hedge fund positions. Gerdau SA (NYSE:GGB) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on GGB as the stock returned 26.4% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
