Here is What Hedge Funds Think About Gastar Exploration Limited (USA) (GST)

Many investors, including Carl Icahn or Stan Druckenmiller, have been saying for a while now that the current market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the third quarter, many investors lost money due to unpredictable events such as the concerns over Valeant’s drug pricing policy that led to an overall drop among pharma stocks. Nevertheless, many of the stocks that tanked in the third quarter still sport strong fundamentals and their decline was more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Gastar Exploration Limited (USA) (NYSEMKT:GST) changed recently.

Gastar Exploration Limited (USA) (NYSEMKT:GST) shareholders have witnessed a decrease in hedge fund interest recently. 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 GSI Technology, Inc. (NASDAQ:GSIT), and Symmetry Surgical Inc (NASDAQ:SSRG) to gather more data points.

In the eyes of most traders, hedge funds are viewed as slow, outdated financial vehicles of yesteryear. While there are over 8000 funds trading at present, our researchers look at the aristocrats of this group, approximately 700 funds. These money managers control the lion’s share of the smart money’s total asset base, and by observing their highest performing stock picks, Insider Monkey has come up with a number of investment strategies that have historically surpassed the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy defeated the S&P 500 index by 12 percentage points a year for a decade in their back tests.

Now, let’s view the fresh action encompassing Gastar Exploration Limited (USA) (NYSEMKT:GST).

How have hedgies been trading Gastar Exploration Limited (USA) (NYSEMKT:GST)?

At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a decrease of 33% from one quarter earlier. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Israel Englander’s Millennium Management has the largest position in Gastar Exploration Limited (USA) (NYSEMKT:GST), worth close to $1.8 million, corresponding to less than 0.1% of its total 13F portfolio. On Millennium Management’s heels is Citadel Investment Group, managed by Ken Griffin, which holds a $0.7 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Other members of the smart money with similar optimism contain Gregory Fraser, Rudolph Kluiber, and Timothy Krochuk’s GRT Capital Partners, Chao Ku’s Nine Chapters Capital Management, and D E Shaw.

Seeing as Gastar Exploration Limited (USA) (NYSEMKT:GST) has witnessed falling interest from hedge fund managers, logic holds that there exists a select few fund managers that slashed their entire stakes heading into Q4. It’s worth mentioning that Michael Reeber’s Andalusian Capital Partners dropped the biggest position of the “upper crust” of funds followed by Insider Monkey, totaling close to $2.3 million in stock, and Marc Lehmann’s Riverloft Capital Management was right behind this move, as the fund said goodbye to about $0.2 million worth of shares. These transactions are interesting, as aggregate hedge fund interest dropped by 3 funds heading into Q4.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Gastar Exploration Limited (USA) (NYSEMKT:GST) but similarly valued. We will take a look at GSI Technology, Inc. (NASDAQ:GSIT), Symmetry Surgical Inc (NASDAQ:SSRG), and Aurinia Pharmaceuticals Inc (NASDAQ:AUPH). All of these stocks’ market caps are similar to Gastar Exploration Limited (USA) (NYSEMKT:GST)’s market cap.

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 $7 million. That figure was $3 million in Gastar Exploration Limited (USA) (NYSEMKT:GST)’s case. Symmetry Surgical Inc (NASDAQ:SSRG) is the most popular stock in this table. On the other hand, Aurinia Pharmaceuticals Inc (NASDAQ:AUPH) is the least popular one with only 4 bullish hedge fund positions. Gastar Exploration Limited (USA) (NYSEMKT:GST) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard, Symmetry Surgical Inc (NASDAQ:SSRG) might be a better candidate to consider a long position.