Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Goodrich Petroleum Corporation (NYSE:GDP).
Goodrich Petroleum Corporation (NYSE:GDP) has experienced a decrease in enthusiasm from smart money of late. Goodrich Petroleum Corporation (NYSE:GDP) was in 5 hedge funds’ portfolios at the end of March. The all time high for this statistic is 8. There were 8 hedge funds in our database with GDP holdings at the end of December. Our calculations also showed that GDP isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Rudolph Kluiber of GRT Capital Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $23 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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. With all of this in mind let’s review the fresh hedge fund action encompassing Goodrich Petroleum Corporation (NYSE:GDP).
Do Hedge Funds Think GDP Is A Good Stock To Buy Now?
At Q1’s end, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -38% from the fourth quarter of 2020. By comparison, 4 hedge funds held shares or bullish call options in GDP a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Goodrich Petroleum Corporation (NYSE:GDP) was held by Anchorage Advisors, which reported holding $14.9 million worth of stock at the end of December. It was followed by Adage Capital Management with a $3.2 million position. Other investors bullish on the company included Renaissance Technologies, Prescott Group Capital Management, and GRT Capital Partners. In terms of the portfolio weights assigned to each position Anchorage Advisors allocated the biggest weight to Goodrich Petroleum Corporation (NYSE:GDP), around 0.74% of its 13F portfolio. Prescott Group Capital Management is also relatively very bullish on the stock, dishing out 0.45 percent of its 13F equity portfolio to GDP.
Because Goodrich Petroleum Corporation (NYSE:GDP) has witnessed a decline in interest from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of hedgies that slashed their full holdings heading into Q2. At the top of the heap, Matt Smith’s Deep Basin Capital cut the largest stake of all the hedgies monitored by Insider Monkey, totaling close to $6.4 million in stock, and George McCabe’s Portolan Capital Management was right behind this move, as the fund dumped about $0.5 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 3 funds heading into Q2.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Goodrich Petroleum Corporation (NYSE:GDP) but similarly valued. We will take a look at Siebert Financial Corp. (NASDAQ:SIEB), IEC Electronics Corp. (NASDAQ:IEC), Aptevo Therapeutics Inc. (NASDAQ:APVO), TRACON Pharmaceuticals Inc (NASDAQ:TCON), Salisbury Bancorp, Inc. (NASDAQ:SAL), inTEST Corporation (NYSE:INTT), and Greenland Technologies Holding Corporation (NASDAQ:GTEC). All of these stocks’ market caps are similar to GDP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SIEB | 3 | 831 | 2 |
| IEC | 1 | 4081 | -1 |
| APVO | 8 | 68540 | -1 |
| TCON | 6 | 48141 | -2 |
| SAL | 1 | 640 | 1 |
| INTT | 4 | 17935 | 1 |
| GTEC | 1 | 539 | 0 |
| Average | 3.4 | 20101 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.4 hedge funds with bullish positions and the average amount invested in these stocks was $20 million. That figure was $21 million in GDP’s case. Aptevo Therapeutics Inc. (NASDAQ:APVO) is the most popular stock in this table. On the other hand IEC Electronics Corp. (NASDAQ:IEC) is the least popular one with only 1 bullish hedge fund positions. Goodrich Petroleum Corporation (NYSE:GDP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GDP is 49.3. 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 17.4% in 2021 through June 18th and still beat the market by 6.1 percentage points. Hedge funds were also right about betting on GDP as the stock returned 24% since the end of Q1 (through 6/18) 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.
