Is GCM Grosvenor Inc. (GCMG) A Good Stock To Buy?

[view original post]

After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of March 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards GCM Grosvenor Inc. (NASDAQ:GCMG).

Is GCMG a good stock to buy? GCM Grosvenor Inc. (NASDAQ:GCMG) was in 17 hedge funds’ portfolios at the end of March. The all time high for this statistic is 16. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. GCMG investors should pay attention to an increase in hedge fund sentiment in recent months. There were 16 hedge funds in our database with GCMG holdings at the end of December. Our calculations also showed that GCMG isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 115 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.

Phillip Gross of Adage Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 homepage. With all of this in mind we’re going to go over the new hedge fund action regarding GCM Grosvenor Inc. (NASDAQ:GCMG).

Do Hedge Funds Think GCMG Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards GCMG over the last 23 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

The largest stake in GCM Grosvenor Inc. (NASDAQ:GCMG) was held by Adage Capital Management, which reported holding $61.7 million worth of stock at the end of December. It was followed by Royce & Associates with a $60.2 million position. Other investors bullish on the company included Millennium Management, Alyeska Investment Group, and ExodusPoint Capital. In terms of the portfolio weights assigned to each position Royce & Associates allocated the biggest weight to GCM Grosvenor Inc. (NASDAQ:GCMG), around 0.4% of its 13F portfolio. Gillson Capital is also relatively very bullish on the stock, earmarking 0.25 percent of its 13F equity portfolio to GCMG.

With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. Alyeska Investment Group, managed by Anand Parekh, established the most outsized position in GCM Grosvenor Inc. (NASDAQ:GCMG). Alyeska Investment Group had $17.5 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $1.3 million investment in the stock during the quarter. The other funds with brand new GCMG positions are Greg Eisner’s Engineers Gate Manager, Dmitry Balyasny’s Balyasny Asset Management, and Nick Thakore’s Diametric Capital.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as GCM Grosvenor Inc. (NASDAQ:GCMG) but similarly valued. We will take a look at Xenia Hotels & Resorts Inc (NYSE:XHR), Paramount Group Inc (NYSE:PGRE), Azul S.A. (NYSE:AZUL), TowneBank (NASDAQ:TOWN), AMC Networks Inc (NASDAQ:AMCX), Brandywine Realty Trust (NYSE:BDN), and Mueller Water Products, Inc. (NYSE:MWA). This group of stocks’ market valuations match GCMG’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
XHR 6 8631 0
PGRE 17 135595 -1
AZUL 11 69381 -6
TOWN 9 43368 1
AMCX 22 221973 1
BDN 12 55160 0
MWA 20 288892 0
Average 13.9 117571 -0.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.9 hedge funds with bullish positions and the average amount invested in these stocks was $118 million. That figure was $181 million in GCMG’s case. AMC Networks Inc (NASDAQ:AMCX) is the most popular stock in this table. On the other hand Xenia Hotels & Resorts Inc (NYSE:XHR) is the least popular one with only 6 bullish hedge fund positions. GCM Grosvenor Inc. (NASDAQ:GCMG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GCMG is 70.4. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 gained 28.5% in 2021 through July 23rd and beat the market again by 10.1 percentage points. Unfortunately GCMG wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on GCMG were disappointed as the stock returned -12% since the end of March (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

Follow Gcm Grosvenor Inc.

Suggested Articles:

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