Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Garrett Motion Inc. (NASDAQ:GTX).
Is Garrett Motion Inc. (NASDAQ:GTX) going to take off soon? The smart money was getting more bullish. The number of bullish hedge fund positions increased by 4 recently. Garrett Motion Inc. (NASDAQ:GTX) was in 21 hedge funds’ portfolios at the end of September. The all time high for this statistic is 38. Our calculations also showed that GTX isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind let’s view the latest hedge fund action regarding Garrett Motion Inc. (NASDAQ:GTX).
Michael Price of MFP Investors
Do Hedge Funds Think GTX Is A Good Stock To Buy Now?
At the end of September, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 24% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GTX over the last 25 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
Among these funds, Cyrus Capital Partners held the most valuable stake in Garrett Motion Inc. (NASDAQ:GTX), which was worth $75.3 million at the end of the third quarter. On the second spot was Sessa Capital which amassed $50.9 million worth of shares. Oaktree Capital Management, Baupost Group, and Centerbridge Partners 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 Cyrus Capital Partners allocated the biggest weight to Garrett Motion Inc. (NASDAQ:GTX), around 21.94% of its 13F portfolio. Centerbridge Partners is also relatively very bullish on the stock, designating 2.92 percent of its 13F equity portfolio to GTX.
Consequently, specific money managers have been driving this bullishness. Royce & Associates, managed by Chuck Royce, created the most valuable position in Garrett Motion Inc. (NASDAQ:GTX). Royce & Associates had $3.7 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $1.4 million position during the quarter. The following funds were also among the new GTX investors: Mark Broach’s Manatuck Hill Partners, Ken Griffin’s Citadel Investment Group, and Michael Price’s MFP Investors.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Garrett Motion Inc. (NASDAQ:GTX) but similarly valued. We will take a look at Equity Bancshares, Inc. (NASDAQ:EQBK), American Public Education, Inc. (NASDAQ:APEI), MidWestOne Financial Group, Inc. (NASDAQ:MOFG), Selecta Biosciences, Inc. (NASDAQ:SELB), Rayonier Advanced Materials Inc (NYSE:RYAM), McEwen Mining Inc (NYSE:MUX), and Eliem Therapeutics Inc (NASDAQ:ELYM). This group of stocks’ market values are similar to GTX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EQBK | 6 | 31854 | -1 |
| APEI | 13 | 104222 | 1 |
| MOFG | 6 | 14068 | 1 |
| SELB | 13 | 22963 | 2 |
| RYAM | 10 | 32616 | -1 |
| MUX | 8 | 13130 | 0 |
| ELYM | 8 | 283514 | 8 |
| Average | 9.1 | 71767 | 1.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.1 hedge funds with bullish positions and the average amount invested in these stocks was $72 million. That figure was $236 million in GTX’s case. American Public Education, Inc. (NASDAQ:APEI) is the most popular stock in this table. On the other hand Equity Bancshares, Inc. (NASDAQ:EQBK) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Garrett Motion Inc. (NASDAQ:GTX) is more popular among hedge funds. Our overall hedge fund sentiment score for GTX is 75.6. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 29.6% in 2021 and managed to beat the market by 3.6 percentage points. Hedge funds were also right about betting on GTX as the stock returned 9% since the end of September (through 12/31) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Follow Garrett Motion Inc. (NYSE:GTX)
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Disclosure: None. This article was originally published at Insider Monkey.
