Hedge fund managers like David Einhorn, Bill Ackman, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Global Medical REIT Inc. (NYSE:GMRE).
Is Global Medical REIT Inc. (NYSE:GMRE) the right pick for your portfolio? Money managers are becoming hopeful. The number of bullish hedge fund positions increased by 7 in recent months. Our calculations also showed that gmre isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We’re going to take a glance at the latest hedge fund action encompassing Global Medical REIT Inc. (NYSE:GMRE).
What does smart money think about Global Medical REIT Inc. (NYSE:GMRE)?
At Q1’s end, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 78% from one quarter earlier. By comparison, 5 hedge funds held shares or bullish call options in GMRE a year ago. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
Among these funds, Marshall Wace LLP held the most valuable stake in Global Medical REIT Inc. (NYSE:GMRE), which was worth $6.6 million at the end of the first quarter. On the second spot was Millennium Management which amassed $6.1 million worth of shares. Moreover, Alyeska Investment Group, Carlson Capital, and Arrowstreet Capital were also bullish on Global Medical REIT Inc. (NYSE:GMRE), allocating a large percentage of their portfolios to this stock.
With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the biggest position in Global Medical REIT Inc. (NYSE:GMRE). Marshall Wace LLP had $6.6 million invested in the company at the end of the quarter. Clint Carlson’s Carlson Capital also made a $3.9 million investment in the stock during the quarter. The following funds were also among the new GMRE investors: Ken Griffin’s Citadel Investment Group, Matthew Halbower’s Pentwater Capital Management, and David Harding’s Winton Capital Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Global Medical REIT Inc. (NYSE:GMRE) but similarly valued. These stocks are MutualFirst Financial, Inc. (NASDAQ:MFSF), PDL Community Bancorp (NASDAQ:PDLB), Concrete Pumping Holdings, Inc. (NASDAQ:BBCP), and Spirit of Texas Bancshares, Inc. (NASDAQ:STXB). All of these stocks’ market caps match GMRE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MFSF | 3 | 24850 | 0 |
| PDLB | 2 | 1874 | 0 |
| BBCP | 5 | 18461 | -5 |
| STXB | 1 | 605 | 0 |
| Average | 2.75 | 11448 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 2.75 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $35 million in GMRE’s case. Concrete Pumping Holdings, Inc. (NASDAQ:BBCP) is the most popular stock in this table. On the other hand Spirit of Texas Bancshares, Inc. (NASDAQ:STXB) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Global Medical REIT Inc. (NYSE:GMRE) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Hedge funds were also right about betting on GMRE as the stock returned 15.1% during the same period and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
