Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Is Green Brick Partners Inc (NASDAQ:GRBK) ready to rally soon? Investors who are in the know are taking a pessimistic view. The number of long hedge fund positions shrunk by 2 recently. Our calculations also showed that grbk isn’t among the 30 most popular stocks among hedge funds.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s take a peek at the fresh hedge fund action encompassing Green Brick Partners Inc (NASDAQ:GRBK).
How have hedgies been trading Green Brick Partners Inc (NASDAQ:GRBK)?
Heading into the fourth quarter of 2018, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -12% from one quarter earlier. On the other hand, there were a total of 8 hedge funds with a bullish position in GRBK at the beginning of this year. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
More specifically, Greenlight Capital was the largest shareholder of Green Brick Partners Inc (NASDAQ:GRBK), with a stake worth $243.6 million reported as of the end of September. Trailing Greenlight Capital was Ariel Investments, which amassed a stake valued at $21.4 million. Birch Run Capital, AWH Capital, and Stadium Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
Because Green Brick Partners Inc (NASDAQ:GRBK) has experienced declining sentiment from hedge fund managers, logic holds that there were a few fund managers that slashed their entire stakes last quarter. At the top of the heap, Ken Griffin’s Citadel Investment Group dropped the largest position of the “upper crust” of funds followed by Insider Monkey, valued at close to $6.5 million in stock, and David Rodriguez-Fraile’s BlueMar Capital Management was right behind this move, as the fund sold off about $1.4 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 2 funds last quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Green Brick Partners Inc (NASDAQ:GRBK) but similarly valued. These stocks are NexPoint Strategic Opportunities Fund (NYSE:NHF), NVE Corporation (NASDAQ:NVEC), OptiNose, Inc. (NASDAQ:OPTN), and The First Bancshares, Inc. (MS) (NASDAQ:FBMS). This group of stocks’ market values match GRBK’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NHF | 5 | 74617 | 0 |
| NVEC | 6 | 15080 | 1 |
| OPTN | 6 | 15873 | 0 |
| FBMS | 7 | 40520 | 0 |
| Average | 6 | 36523 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $37 million. That figure was $299 million in GRBK’s case. The First Bancshares, Inc. (MS) (NASDAQ:FBMS) is the most popular stock in this table. On the other hand NexPoint Strategic Opportunities Fund (NYSE:NHF) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Green Brick Partners Inc (NASDAQ:GRBK) 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. This article was originally published at Insider Monkey.
