It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The S&P 500 Index gained 7.6% in the 12 month-period that ended November 21, while less than 49% of its stocks beat the benchmark. In contrast, the 30 most popular mid-cap stocks among the top hedge fund investors tracked by the Insider Monkey team returned 18% over the same period, which provides evidence that these money managers do have great stock picking abilities. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Griffon Corporation (NYSE:GFF).
Griffon Corporation (NYSE:GFF) shareholders have witnessed an increase in support from the world’s most successful money managers recently. GFF was in 11 hedge funds’ portfolios at the end of the third quarter of 2016. There were 9 hedge funds in our database with GFF positions at the end of the second quarter. At the end of this article we will also compare GFF to other stocks including MINDBODY Inc (NASDAQ:MB), Central Pacific Financial Corp. (NYSE:CPF), and Lattice Semiconductor (NASDAQ:LSCC) to get a better sense of its popularity.
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We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
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What have hedge funds been doing with Griffon Corporation (NYSE:GFF)?
At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a 22% rise from one quarter earlier. The graph below displays the number of hedge funds with bullish positions in GFF over the last 5 quarters, which peaked at 12 at the end of 2015. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, GAMCO Investors, led by Mario Gabelli, holds the most valuable position in Griffon Corporation (NYSE:GFF). GAMCO Investors has a $102.3 million position in the stock. On GAMCO Investors’ heels is Royce & Associates, led by Chuck Royce, which holds a $9.5 million position. Remaining hedge funds and institutional investors that are bullish consist of Renaissance Technologies, one of the largest hedge funds in the world, Israel Englander’s Millennium Management, and David E. Shaw’s D E Shaw. 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 were leading the bulls’ herd. Citadel Investment Group, led by Ken Griffin, assembled the most valuable position in Griffon Corporation (NYSE:GFF). Citadel Investment Group had $1.6 million invested in the company at the end of the quarter. Michael Platt and William Reeves’ BlueCrest Capital Mgmt also made a $0.2 million investment in the stock during the quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Griffon Corporation (NYSE:GFF). These stocks are MINDBODY Inc (NASDAQ:MB), Central Pacific Financial Corp. (NYSE:CPF), Lattice Semiconductor (NASDAQ:LSCC), and MedEquities Realty Trust Inc (NYSE:MRT). This group of stocks’ market valuations are closest to GFF’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MB | 20 | 135969 | 8 |
| CPF | 11 | 55016 | -1 |
| LSCC | 11 | 24582 | 6 |
| MRT | 14 | 75213 | 14 |
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $73 million. That figure was $125 million in GFF’s case. MINDBODY Inc (NASDAQ:MB) is the most popular stock in this table. On the other hand LSCC and CPF are the least popular ones with only 11 bullish hedge fund positions. Compared to these stocks Griffon Corporation (NYSE:GFF) is only as popular as CPF and LSCC. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock.
Disclosure: None
