Golar LNG Limited (USA) (GLNG): Hedge Funds and Insiders Are Bearish, What Should You Do?

Golar LNG Limited (USA) (NASDAQ:GLNG) has seen a decrease in hedge fund interest recently.

If you’d ask most market participants, hedge funds are assumed to be underperforming, old financial tools of years past. While there are more than 8000 funds in operation at the moment, we look at the elite of this club, close to 450 funds. Most estimates calculate that this group oversees the lion’s share of the smart money’s total capital, and by watching their best picks, we have found a number of investment strategies that have historically outpaced Mr. Market. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).

Equally as important, positive insider trading activity is a second way to break down the marketplace. As the old adage goes: there are lots of incentives for a corporate insider to drop shares of his or her company, but only one, very obvious reason why they would buy. Several academic studies have demonstrated the useful potential of this method if “monkeys” know what to do (learn more here).

Consequently, it’s important to take a gander at the recent action encompassing Golar LNG Limited (USA) (NASDAQ:GLNG).

What does the smart money think about Golar LNG Limited (USA) (NASDAQ:GLNG)?

In preparation for this quarter, a total of 24 of the hedge funds we track held long positions in this stock, a change of 0% from the first quarter. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their holdings considerably.

When looking at the hedgies we track, Hound Partners, managed by Jonathan Auerbach, holds the largest position in Golar LNG Limited (USA) (NASDAQ:GLNG). Hound Partners has a $123.2 million position in the stock, comprising 7.2% of its 13F portfolio. Sitting at the No. 2 spot is Marble Arch Investments, managed by Scott McLellan, which held a $60.7 million position; 4.4% of its 13F portfolio is allocated to the company. Remaining peers that are bullish include Matthew Iorio’s White Elm Capital, Charles Clough’s Clough Capital Partners and Gregg J. Powers’s Private Capital Management.

Seeing as Golar LNG Limited (USA) (NASDAQ:GLNG) has witnessed a declination in interest from hedge fund managers, we can see that there were a few hedge funds that elected to cut their positions entirely last quarter. Interestingly, Bain Capital’s Brookside Capital dumped the largest position of all the hedgies we monitor, worth close to $25.5 million in stock.. Michael Karsch’s fund, Karsch Capital Management, also dumped its stock, about $20.1 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Insider trading activity in Golar LNG Limited (USA) (NASDAQ:GLNG)

Insider purchases made by high-level executives is at its handiest when the primary stock in question has experienced transactions within the past half-year. Over the last six-month time frame, Golar LNG Limited (USA) (NASDAQ:GLNG) has experienced zero unique insiders buying, and zero insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to Golar LNG Limited (USA) (NASDAQ:GLNG). These stocks are Kirby Corporation (NYSE:KEX), Teekay Corporation (NYSE:TK), Tidewater Inc. (NYSE:TDW), and Teekay LNG Partners L.P. (NYSE:TGP). All of these stocks are in the shipping industry and their market caps are closest to GLNG’s market cap.