Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks aren’t doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to Gerdau SA (NYSE:GGB) changed recently.
Is GGB a good stock to buy now? Gerdau SA (NYSE:GGB) has experienced an increase in support from the world’s most elite money managers lately. Gerdau SA (NYSE:GGB) was in 11 hedge funds’ portfolios at the end of September. The all time high for this statistics is 20. 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 for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Ken Fisher of Fisher Asset Management
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 let’s take a gander at the new hedge fund action surrounding Gerdau SA (NYSE:GGB).
Do Hedge Funds Think GGB Is A Good Stock To Buy Now?
At the end of September, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from the previous quarter. On the other hand, there were a total of 9 hedge funds with a bullish position in GGB a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Contrarian Capital held the most valuable stake in Gerdau SA (NYSE:GGB), which was worth $76.5 million at the end of the third quarter. On the second spot was Fisher Asset Management which amassed $34.8 million worth of shares. Millennium Management, Citadel Investment Group, and Arrowstreet Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Contrarian Capital allocated the biggest weight to Gerdau SA (NYSE:GGB), around 32.59% of its 13F portfolio. Fisher Asset Management is also relatively very bullish on the stock, setting aside 0.03 percent of its 13F equity portfolio to GGB.
With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. Tudor Investment Corp, managed by Paul Tudor Jones, assembled the most outsized position in Gerdau SA (NYSE:GGB). Tudor Investment Corp had $0.1 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also initiated a $0 million position during the quarter.
Let’s now review hedge fund activity in other stocks similar to Gerdau SA (NYSE:GGB). These stocks are Commerce Bancshares, Inc. (NASDAQ:CBSH), Perrigo Company (NASDAQ:PRGO), CubeSmart (NYSE:CUBE), American Airlines Group Inc (NASDAQ:AAL), Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA), Herbalife Nutrition Ltd. (NYSE:HLF), and Vroom, Inc. (NASDAQ:VRM). This group of stocks’ market valuations match GGB’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CBSH | 15 | 50769 | -1 |
| PRGO | 29 | 370821 | -4 |
| CUBE | 18 | 229025 | -6 |
| AAL | 37 | 208177 | -10 |
| MNTA | 35 | 1256999 | -7 |
| HLF | 36 | 2374897 | 0 |
| VRM | 34 | 399177 | 6 |
| Average | 29.1 | 698552 | -3.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.1 hedge funds with bullish positions and the average amount invested in these stocks was $699 million. That figure was $134 million in GGB’s case. American Airlines Group Inc (NASDAQ:AAL) is the most popular stock in this table. On the other hand Commerce Bancshares, Inc. (NASDAQ:CBSH) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Gerdau SA (NYSE:GGB) is even less popular than CBSH. Our overall hedge fund sentiment score for GGB is 22.5. 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. Hedge funds clearly dropped the ball on GGB as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 GGB as the stock returned 22% since Q3 (through December 8th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
