Gerdau SA (ADR) (GGB): Hedge Funds Are Bearish and Insiders Are Undecided, What Should You Do?
Is Gerdau SA (ADR) (NYSE:GGB) a good investment?
To many of your fellow readers, hedge funds are viewed as bloated, old investment tools of an era lost to time. Although there are over 8,000 hedge funds in operation today, Insider Monkey focuses on the upper echelon of this club, around 525 funds. Analysts calculate that this group oversees most of all hedge funds' total assets, and by monitoring their best investments, we've come up with a few investment strategies that have historically outstripped the S&P 500. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we've began to sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 33 percentage points in 11 months (find a sample of our picks).
Just as necessary, positive insider trading activity is another way to look at the investments you're interested in. Just as you'd expect, there are plenty of motivations for an upper level exec to sell shares of his or her company, but just one, very clear reason why they would buy. Various empirical studies have demonstrated the market-beating potential of this strategy if shareholders understand what to do (learn more here).
Furthermore, we're going to study the recent info for Gerdau SA (ADR) (NYSE:GGB).
What have hedge funds been doing with Gerdau SA (ADR) (NYSE:GGB)?
At the end of the second quarter, a total of 9 of the hedge funds we track were long in this stock, a change of -10% from one quarter earlier. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were upping their stakes substantially.
Out of the hedge funds we follow, Jim Simons's Renaissance Technologies had the largest position in Gerdau SA (ADR) (NYSE:GGB), worth close to $31.3 million, comprising 0.1% of its total 13F portfolio. Coming in second is Carlson Capital, managed by Clint Carlson, which held a $15.9 million position; 0.2% of its 13F portfolio is allocated to the company. Some other peers with similar optimism include Ken Fisher's Fisher Asset Management, Israel Englander's Millennium Management and Jason Adler's AlphaBet Management.
Due to the fact Gerdau SA (ADR) (NYSE:GGB) has faced declining interest from the smart money's best and brightest, logic holds that there exists a select few funds that slashed their positions entirely heading into Q2. It's worth mentioning that Phill Gross and Robert Atchinson's Adage Capital Management dropped the largest investment of the "upper crust" of funds we monitor, worth about $23.1 million in stock, and David Costen Haley of HBK Investments was right behind this move, as the fund dropped about $0.8 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 1 funds heading into Q2.
What have insiders been doing with Gerdau SA (ADR) (NYSE:GGB)?
Insider buying made by high-level executives is best served when the company in question has seen transactions within the past six months. Over the latest six-month time frame, Gerdau SA (ADR) (NYSE:GGB) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).
We'll also review the relationship between both of these indicators in other stocks similar to Gerdau SA (ADR) (NYSE:GGB). These stocks are Companhia Siderurgica Nacional (ADR) (NYSE:SID), POSCO (ADR) (NYSE:PKX), Tenaris S.A. (ADR) (NYSE:TS), ArcelorMittal (ADR) (NYSE:MT), and Nucor Corporation (NYSE:NUE). All of these stocks are in the steel & iron industry and their market caps are similar to GGB's market cap.
# of Hedge Funds
# of Insiders Buying
# of Insiders Selling
Companhia Siderurgica Nacional (ADR) (NYSE:SID)
POSCO (ADR) (NYSE:PKX)
Tenaris S.A. (ADR) (NYSE:TS)
ArcelorMittal (ADR) (NYSE:MT)
Nucor Corporation (NYSE:NUE)
Using the returns demonstrated by the previously mentioned strategies, average investors must always track hedge fund and insider trading sentiment, and Gerdau SA (ADR) (NYSE:GGB) is no exception.