Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts, usually don’t make them change their opinion towards a company. This time it may be different. During the fourth quarter of 2018 we observed increased volatility and small-cap stocks underperformed the market. Things completely reversed during the first half of 2019. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD) to find out whether it was one of their high conviction long-term ideas.
Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD) has experienced an increase in activity from the world’s largest hedge funds lately. GLDD was in 22 hedge funds’ portfolios at the end of June. There were 18 hedge funds in our database with GLDD holdings at the end of the previous quarter. Our calculations also showed that GLDD isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a gander at the fresh hedge fund action encompassing Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD).
How are hedge funds trading Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD)?
At Q2’s end, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 22% from one quarter earlier. On the other hand, there were a total of 10 hedge funds with a bullish position in GLDD a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, D E Shaw was the largest shareholder of Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD), with a stake worth $16.4 million reported as of the end of March. Trailing D E Shaw was Renaissance Technologies, which amassed a stake valued at $14.4 million. Minerva Advisors, Wynnefield Capital, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
Consequently, specific money managers were breaking ground themselves. Impax Asset Management, managed by Ian Simm, created the biggest position in Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD). Impax Asset Management had $2 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also initiated a $0.9 million position during the quarter. The following funds were also among the new GLDD investors: Jonathan Soros’s JS Capital, Steve Cohen’s Point72 Asset Management, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Let’s also examine hedge fund activity in other stocks similar to Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD). These stocks are Oasis Midstream Partners LP (NYSE:OMP), Gulfport Energy Corporation (NASDAQ:GPOR), Cerus Corporation (NASDAQ:CERS), and Mr. Cooper Group Inc. (NASDAQ:COOP). This group of stocks’ market values are similar to GLDD’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OMP | 5 | 15907 | 2 |
| GPOR | 17 | 105656 | -6 |
| CERS | 13 | 98617 | -4 |
| COOP | 23 | 237258 | -4 |
| Average | 14.5 | 114360 | -3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $114 million. That figure was $100 million in GLDD’s case. Mr. Cooper Group Inc. (NASDAQ:COOP) is the most popular stock in this table. On the other hand Oasis Midstream Partners LP (NYSE:OMP) is the least popular one with only 5 bullish hedge fund positions. Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately GLDD wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on GLDD were disappointed as the stock returned -5.3% during the third quarter 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
