Seven Lakes market analysis

Hello Seven Lakers,

we had a look at our data and noticed that big investment funds and whales have been buying Gartner Inc. stock (NYSE: IT) 

The list of funds included:

• Wellington Management: increased by 13% their IT portfolio (worth $644 million)

• Citadel

• Winslow Capital Management

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 What is Gartner (NYSE: IT)?

• Gartner Inc. provides data insights to companies’ executives and their teams to guide them in their business decisions

• It serves >15,000 enterprises in approximately 90 countries and territories in every industry and enterprise size

• Operates through three segments

  • Research: experts provide data driven research to clients

  • Conferences: organizes business conferences to allow clients to learn, share and network

  • Consulting: provides consulting services to senior executives involved in technology-driven strategic initiatives

Recent Gartner earning results: what happened?

• In August, Gartner reported 2Q23 results 

• In the quarter, revenues were $1.5 billion (+9.2% increase vs. last year)

• Contract value with enterprises was $4.6 billion (+8.9% increase vs. last year)

• Free cash flow was up +4% vs. last year to $410 million, with net income coming in at $436 million during the quarter

• With these strong earnings results, management increased free cash flow, EBITDA, and diluted EPS guidance for 2023, showcasing the business’ strong outlook going into the last few months of the year

• In addition to solid financial metric growth, management repurchased 400,000 shares in the quarter for $132 million

Why are investment funds buying Gartner?

Investment funds are now thinking Gartner is an interesting buying opportunity

On top of the positive results showed above, here’s why they like the company:

• Company is now focusing heavily on maintaining a high operating profit (EBITDA) margin, rather than focusing on pure growth; the more profitable Gartner is, the better it can return capital to investors via dividends

• The 19-20% EBITDA margin they deliver is expected to expand as the company has mainly fixed costs (so when revenue increase, costs do not increase proportionally - this expands profit margins)

• Gartner is now nearing the end of an heavy investment spend cycle, and can start collecting the results of past spending

• Gartner is not expected to do large acquisitions: now the priority will be stocks buybacks, with ~$1bn in authorization

• Investment bank Jefferies expects the stock to perform +14% in the next 12 months

Gartner: trading by US Politicians

• Unique recent trade made by Congress member was completed by Ro Khanna (Democrat / CA)

• Just 2 days after the 2Q23 results, he sold $1k-15k of Gartner stock; this seems normal profit taking after positive result

• All other transactions were quite old (May-July 2023)

• It seems Congress members have no insider information on the stock; not a lot of activity on the name

If you want to be notified every day when funds, whales, politicians do similar purchases, feel free to click below 👇👇👇👇

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Gartner: stock trading by CEO and Management

James Smith (Chairman at Gartner) has been selling the stock in September

This is not optimal, and represents a red flag to assess

If you want to be notified every day when funds, whales, politicians do similar purchases, feel free to click below 👇👇👇👇

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Gartner: Government contracts

Gartner awarded more that $1 million in September in Government contracts

It seems Gartner is working a lot together with US Government; we would closely monitor transactions made by politicians as Gartner is good candidate for political trading 

If Congress members know in advance about these contracts, they can trade accordingly

Summary

• Company reported positive results

• Several investment funds are buying the stock

• Investment bank Jefferies expects a 14% return in 12 months on the stock

• Not a lot of trades placed by US politicians on the stock, even though Ro Khanna sold just after the 2Q23 results

• Chairman has been heavily selling the stock in September

• Company awarded more that $1 million in government contracts in September