Was The Smart Money Right About Piling Into Gentex Corporation (GNTX)?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Gentex Corporation (NASDAQ:GNTX).

Gentex Corporation (NASDAQ:GNTX) investors should pay attention to an increase in hedge fund interest recently. Gentex Corporation (NASDAQ:GNTX) was in 38 hedge funds’ portfolios at the end of June. The all time high for this statistics is 37. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 37 hedge funds in our database with GNTX positions at the end of the first quarter. Our calculations also showed that GNTX isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 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 S&P 500 ETFs by 58 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 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.

Michael Gelband of ExodusPoint Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. With all of this in mind we’re going to take a gander at the key hedge fund action encompassing Gentex Corporation (NASDAQ:GNTX).

What does smart money think about Gentex Corporation (NASDAQ:GNTX)?

At the end of the second quarter, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in GNTX over the last 20 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Gentex Corporation (NASDAQ:GNTX) was held by Renaissance Technologies, which reported holding $114.5 million worth of stock at the end of June. It was followed by Adage Capital Management with a $100.8 million position. Other investors bullish on the company included Nitorum Capital, Royce & Associates, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Nitorum Capital allocated the biggest weight to Gentex Corporation (NASDAQ:GNTX), around 3.93% of its 13F portfolio. Nishkama Capital is also relatively very bullish on the stock, earmarking 2.93 percent of its 13F equity portfolio to GNTX.

As one would reasonably expect, some big names have jumped into Gentex Corporation (NASDAQ:GNTX) headfirst. Nishkama Capital, managed by Ravee Mehta, established the most outsized position in Gentex Corporation (NASDAQ:GNTX). Nishkama Capital had $6.9 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also made a $4.2 million investment in the stock during the quarter. The following funds were also among the new GNTX investors: Michael Gelband’s ExodusPoint Capital, Brandon Haley’s Holocene Advisors, and Thomas Bailard’s Bailard Inc.

Let’s go over hedge fund activity in other stocks similar to Gentex Corporation (NASDAQ:GNTX). We will take a look at Pentair plc (NYSE:PNR), Bruker Corporation (NASDAQ:BRKR), TIM Participacoes SA (NYSE:TSU), Anaplan, Inc. (NYSE:PLAN), MKS Instruments, Inc. (NASDAQ:MKSI), PRA Health Sciences Inc (NASDAQ:PRAH), and Herbalife Nutrition Ltd. (NYSE:HLF). This group of stocks’ market caps are closest to GNTX’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.4 hedge funds with bullish positions and the average amount invested in these stocks was $946 million. That figure was $555 million in GNTX’s case. Anaplan, Inc. (NYSE:PLAN) is the most popular stock in this table. On the other hand TIM Participacoes SA (NYSE:TSU) is the least popular one with only 15 bullish hedge fund positions. Gentex Corporation (NASDAQ:GNTX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GNTX is 69.8. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23% in 2020 through October 30th and still beat the market by 20.1 percentage points. Hedge funds were also right about betting on GNTX, though not to the same extent, as the stock returned 8.4% since Q2 (through October 30th) and outperformed the market as well.

Disclosure: None. This article was originally published at Insider Monkey.