Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Granite Point Mortgage Trust Inc. (NYSE:GPMT)? The smart money sentiment can provide an answer to this question.
Granite Point Mortgage Trust Inc. (NYSE:GPMT) was in 12 hedge funds’ portfolios at the end of March. GPMT investors should be aware of an increase in hedge fund interest lately. There were 6 hedge funds in our database with GPMT positions at the end of the previous quarter. Our calculations also showed that GPMT isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? 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 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Michael Platt of Bluecrest Capital Management
We’re going to take a look at the new hedge fund action encompassing Granite Point Mortgage Trust Inc. (NYSE:GPMT).
Hedge fund activity in Granite Point Mortgage Trust Inc. (NYSE:GPMT)
At the end of the first quarter, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 100% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in GPMT over the last 15 quarters. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
Among these funds, Alyeska Investment Group held the most valuable stake in Granite Point Mortgage Trust Inc. (NYSE:GPMT), which was worth $14.9 million at the end of the first quarter. On the second spot was Clough Capital Partners which amassed $10.1 million worth of shares. Moreover, Renaissance Technologies, Balyasny Asset Management, and D E Shaw were also bullish on Granite Point Mortgage Trust Inc. (NYSE:GPMT), allocating a large percentage of their portfolios to this stock.
As aggregate interest increased, key money managers were breaking ground themselves. Alyeska Investment Group, managed by Anand Parekh, initiated the largest position in Granite Point Mortgage Trust Inc. (NYSE:GPMT). Alyeska Investment Group had $14.9 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $5.9 million investment in the stock during the quarter. The following funds were also among the new GPMT investors: Michael Platt and William Reeves’s BlueCrest Capital Mgmt., David Harding’s Winton Capital Management, and Mike Vranos’s Ellington.
Let’s now take a look at hedge fund activity in other stocks similar to Granite Point Mortgage Trust Inc. (NYSE:GPMT). We will take a look at Berry Petroleum Corporation (NASDAQ:BRY), Trueblue Inc (NYSE:TBI), Lantheus Holdings Inc (NASDAQ:LNTH), and Ra Pharmaceuticals, Inc. (NASDAQ:RARX). This group of stocks’ market values match GPMT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BRY | 16 | 166506 | 2 |
| TBI | 17 | 78413 | 2 |
| LNTH | 18 | 99743 | 1 |
| RARX | 20 | 267787 | 3 |
| Average | 17.75 | 153112 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $153 million. That figure was $44 million in GPMT’s case. Ra Pharmaceuticals, Inc. (NASDAQ:RARX) is the most popular stock in this table. On the other hand Berry Petroleum Corporation (NASDAQ:BRY) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Granite Point Mortgage Trust Inc. (NYSE:GPMT) is even less popular than BRY. Hedge funds dodged a bullet by taking a bearish stance towards GPMT. Our calculations showed that the top 20 most popular hedge fund stocks returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately GPMT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); GPMT investors were disappointed as the stock returned 2.6% during the same time frame and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in the second quarter.
Disclosure: None. This article was originally published at Insider Monkey.
