Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
Gran Tierra Energy Inc. (NYSEMKT:GTE) investors should pay attention to an increase in hedge fund interest lately. GTE was in 21 hedge funds’ portfolios at the end of September. There were 19 hedge funds in our database with GTE holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Mimecast Ltd (NASDAQ:MIME), Diodes Incorporated (NASDAQ:DIOD), and MacroGenics Inc (NASDAQ:MGNX) to gather more data points.
Follow Gran Tierra Energy Inc. (NYSEMKT:GTE)
Follow Gran Tierra Energy Inc. (NYSEMKT:GTE)
We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
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What does the smart money think about Gran Tierra Energy Inc. (NYSEMKT:GTE)?
Heading into the fourth quarter of 2016, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a gain of 11% from the second quarter of 2016. On the other hand, there were a total of 13 hedge funds with a bullish position in GTE at the beginning of this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Thomas E. Claugus’ GMT Capital has the most valuable position in Gran Tierra Energy Inc. (NYSEMKT:GTE), worth close to $86.4 million, comprising 1.8% of its total 13F portfolio. The second largest stake is held by Greg Boland of West Face Capital, with a $42.1 million position; 24.1% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors with similar optimism encompass Joseph Oughourlian and Michel Brogard’s Amber Capital, Jim Simons’ Renaissance Technologies and Jonathan Barrett and Paul Segal’s Luminus Management. We should note that Luminus Management is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Consequently, specific money managers have jumped into Gran Tierra Energy Inc. (NYSEMKT:GTE) headfirst. Luminus Management, initiated the most valuable position in Gran Tierra Energy Inc. (NYSEMKT:GTE). Luminus Management had $14.5 million invested in the company at the end of the quarter. Joseph Mathias’s Concourse Capital Management also initiated a $3 million position during the quarter. The other funds with brand new GTE positions are John Thiessen’s Vertex One Asset Management and Ken Griffin’s Citadel Investment Group.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Gran Tierra Energy Inc. (NYSEMKT:GTE) but similarly valued. These stocks are Mimecast Ltd (NASDAQ:MIME), Diodes Incorporated (NASDAQ:DIOD), MacroGenics Inc (NASDAQ:MGNX), and Clayton Williams Energy, Inc. (NASDAQ:CWEI). All of these stocks’ market caps match GTE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MIME | 15 | 103285 | 12 |
| DIOD | 8 | 61585 | 1 |
| MGNX | 17 | 166773 | -1 |
| CWEI | 13 | 210513 | 3 |
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $136 million. That figure was $219 million in GTE’s case. MacroGenics Inc (NASDAQ:MGNX) is the most popular stock in this table. On the other hand Diodes Incorporated (NASDAQ:DIOD) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Gran Tierra Energy Inc. (NYSEMKT:GTE) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None
