Is Gardner Denver Holdings, Inc. (GDI) A Good Stock To Buy?

Reymerlyn Martin
Updated

The fourth quarter was a rough one for most investors, as fears of a rising interest rate environment in the U.S, a trade war with China, and a more or less stagnant Europe, weighed heavily on the minds of investors. Both the S&P 500 and Russell 2000 sank as a result, with the Russell 2000, which is composed of smaller companies, being hit especially hard. This was primarily due to hedge funds, which are big supporters of small-cap stocks, pulling some of their capital out of the volatile markets during this time. Let's look at how this market volatility affected the sentiment of hedge funds towards Gardner Denver Holdings, Inc. (NYSE:GDI), and what that likely means for the prospects of the company and its stock.

Gardner Denver Holdings, Inc. (NYSE:GDI) has experienced a decrease in hedge fund interest lately. Our calculations also showed that GDI isn't among the 30 most popular stocks among hedge funds.

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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

CITADEL INVESTMENT GROUP
CITADEL INVESTMENT GROUP

Let's take a glance at the new hedge fund action surrounding Gardner Denver Holdings, Inc. (NYSE:GDI).

What have hedge funds been doing with Gardner Denver Holdings, Inc. (NYSE:GDI)?

At the end of the third quarter, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in GDI over the last 13 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

GDI_dec2018
GDI_dec2018

More specifically, Alyeska Investment Group was the largest shareholder of Gardner Denver Holdings, Inc. (NYSE:GDI), with a stake worth $86.3 million reported as of the end of September. Trailing Alyeska Investment Group was Adage Capital Management, which amassed a stake valued at $70 million. Citadel Investment Group, Goodnow Investment Group, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.

Judging by the fact that Gardner Denver Holdings, Inc. (NYSE:GDI) has experienced falling interest from the entirety of the hedge funds we track, we can see that there lies a certain "tier" of funds who were dropping their full holdings last quarter. Interestingly, Alec Litowitz and Ross Laser's Magnetar Capital said goodbye to the biggest investment of the "upper crust" of funds tracked by Insider Monkey, totaling about $23.6 million in stock. Robert B. Gillam's fund, McKinley Capital Management, also sold off its stock, about $5.7 million worth. These moves are important to note, as total hedge fund interest fell by 3 funds last quarter.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Gardner Denver Holdings, Inc. (NYSE:GDI) but similarly valued. We will take a look at Antero Resources Corp (NYSE:AR), First Horizon National Corporation (NYSE:FHN), Integra Lifesciences Holdings Corp (NASDAQ:IART), and Wix.Com Ltd (NASDAQ:WIX). This group of stocks' market caps match GDI's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AR,20,1780131,4 FHN,19,182996,-4 IART,14,188907,-3 WIX,24,933542,-3 Average,19.25,771394,-1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $771 million. That figure was $372 million in GDI's case. Wix.Com Ltd (NASDAQ:WIX) is the most popular stock in this table. On the other hand Integra Lifesciences Holdings Corp (NASDAQ:IART) is the least popular one with only 14 bullish hedge fund positions. Gardner Denver Holdings, Inc. (NYSE:GDI) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. In this regard WIX might be a better candidate to consider a long position.

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

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