Hedge Funds Are Buying Graphic Packaging Holding Company (GPK)

·6 min read

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don't make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Graphic Packaging Holding Company (NYSE:GPK) to find out whether there were any major changes in hedge funds' views.

Graphic Packaging Holding Company (NYSE:GPK) has experienced an increase in hedge fund interest recently. Graphic Packaging Holding Company (NYSE:GPK) was in 27 hedge funds' portfolios at the end of June. The all time high for this statistic is 44. There were 21 hedge funds in our database with GPK holdings at the end of March. Our calculations also showed that GPK isn't among the 30 most popular stocks among hedge funds (click for Q2 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 79 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.

Ricky Sandler's tsop 10 stock picks
Ricky Sandler's tsop 10 stock picks

Ricky Sandler of Eminence 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 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. 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. Now we're going to take a glance at the key hedge fund action surrounding Graphic Packaging Holding Company (NYSE:GPK).

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

Heading into the third quarter of 2021, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 29% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards GPK over the last 24 quarters. With hedge funds' sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Is GPK A Good Stock To Buy?
Is GPK A Good Stock To Buy?

Among these funds, Impax Asset Management held the most valuable stake in Graphic Packaging Holding Company (NYSE:GPK), which was worth $158.3 million at the end of the second quarter. On the second spot was Waratah Capital Advisors which amassed $79.3 million worth of shares. Eminence Capital, Royce & Associates, and 12th Street Asset Management 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 12th Street Asset Management allocated the biggest weight to Graphic Packaging Holding Company (NYSE:GPK), around 7.22% of its 13F portfolio. Sandbar Asset Management is also relatively very bullish on the stock, earmarking 1.19 percent of its 13F equity portfolio to GPK.

As one would reasonably expect, key hedge funds were leading the bulls' herd. Greenlight Capital, managed by David Einhorn, assembled the most outsized position in Graphic Packaging Holding Company (NYSE:GPK). Greenlight Capital had $15.4 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also made a $14.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Michael Cowley's Sandbar Asset Management, Thomas E. Claugus's GMT Capital, and Paul Marshall and Ian Wace's Marshall Wace LLP.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Graphic Packaging Holding Company (NYSE:GPK) but similarly valued. We will take a look at Workiva Inc (NYSE:WK), National Instruments Corporation (NASDAQ:NATI), Legend Biotech Corporation (NASDAQ:LEGN), SL Green Realty Corp (NYSE:SLG), Grupo Aeroportuario del Sureste (NYSE:ASR), Pure Storage, Inc. (NYSE:PSTG), and BWX Technologies Inc (NYSE:BWXT). This group of stocks' market valuations match GPK's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WK,21,505510,-1 NATI,21,241944,0 LEGN,19,370591,7 SLG,21,144000,0 ASR,5,43748,-3 PSTG,31,791397,1 BWXT,20,160928,4 Average,19.7,322588,1.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.7 hedge funds with bullish positions and the average amount invested in these stocks was $323 million. That figure was $534 million in GPK's case. Pure Storage, Inc. (NYSE:PSTG) is the most popular stock in this table. On the other hand Grupo Aeroportuario del Sureste (NYSE:ASR) is the least popular one with only 5 bullish hedge fund positions. Graphic Packaging Holding Company (NYSE:GPK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GPK is 70.7. 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 gained 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. Hedge funds were also right about betting on GPK as the stock returned 9.4% since the end of Q2 (through 10/15) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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