Is The Gorman-Rupp Company (NYSE: GRC ) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before doing days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is The Gorman-Rupp Company (NYSE: GRC ) going to take off soon? The smart money is becoming less hopeful. The number of bullish hedge fund bets were cut by 2 lately. Our calculations also showed that grc isn't among the 30 most popular stocks among hedge funds . GRC was in 7 hedge funds' portfolios at the end of the fourth quarter of 2018. There were 9 hedge funds in our database with GRC positions at the end of the previous quarter.
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 market by 32 percentage points since May 2014 through March 12, 2019 ( 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.
We're going to check out the new hedge fund action encompassing The Gorman-Rupp Company (NYSE: GRC ).
How are hedge funds trading The Gorman-Rupp Company (NYSE:GRC)?
At the end of the fourth quarter, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of -22% from one quarter earlier. By comparison, 10 hedge funds held shares or bullish call options in GRC a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
The largest stake in The Gorman-Rupp Company (NYSE:GRC) was held by GAMCO Investors , which reported holding $18.9 million worth of stock at the end of December. It was followed by Royce & Associates with a $10.1 million position. Other investors bullish on the company included Renaissance Technologies, Millennium Management, and AQR Capital Management.
Judging by the fact that The Gorman-Rupp Company (NYSE:GRC) has experienced bearish sentiment from the smart money, we can see that there is a sect of funds who sold off their entire stakes heading into Q3. Interestingly, Ken Griffin's Citadel Investment Group sold off the largest stake of the 700 funds monitored by Insider Monkey, totaling about $0.9 million in stock, and D. E. Shaw's D E Shaw was right behind this move, as the fund dumped about $0.5 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 2 funds heading into Q3.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as The Gorman-Rupp Company (NYSE:GRC) but similarly valued. These stocks are The Andersons, Inc. (NASDAQ: ANDE ), OFG Bancorp (NYSE: OFG ), Star Bulk Carriers Corp. (NASDAQ: SBLK ), and Sandstorm Gold Ltd. (NYSE: SAND ). All of these stocks' market caps resemble GRC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ANDE,6,47316,-2 OFG,17,59845,6 SBLK,19,456049,3 SAND,9,42972,-1 Average,12.75,151546,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $152 million. That figure was $34 million in GRC's case. Star Bulk Carriers Corp. (NASDAQ: SBLK ) is the most popular stock in this table. On the other hand The Andersons, Inc. (NASDAQ: ANDE ) is the least popular one with only 6 bullish hedge fund positions. The Gorman-Rupp Company (NYSE:GRC) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks ) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately GRC wasn't nearly as popular as these 15 stock and hedge funds that were betting on GRC were disappointed as the stock returned 9.2% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks ) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey .