How do you pick the next stock to invest in? One way would be to spend hours of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Gran Tierra Energy Inc. (NYSE:GTE).
Gran Tierra Energy Inc. (NYSE:GTE) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 16 hedge funds’ portfolios at the end of September. At the end of this article we will also compare GTE to other stocks including NMI Holdings Inc (NASDAQ:NMIH), PIMCO Corporate&Income Opportunity Fund (NYSE:PTY), and Audentes Therapeutics, Inc. (NASDAQ:BOLD) to get a better sense of its popularity.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to take a look at the new hedge fund action encompassing Gran Tierra Energy Inc. (NYSE:GTE).
How have hedgies been trading Gran Tierra Energy Inc. (NYSE:GTE)?
Heading into the fourth quarter of 2018, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, no change from the previous quarter. The graph below displays the number of hedge funds with bullish position in GTE over the last 13 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, GMT Capital, managed by Thomas E. Claugus, holds the largest position in Gran Tierra Energy Inc. (NYSE:GTE). GMT Capital has a $246.1 million position in the stock, comprising 6.4% of its 13F portfolio. Coming in second is Luminus Management, led by Jonathan Barrett and Paul Segal, holding a $70.7 million position; the fund has 1.4% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish encompass Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Jim Simons’s Renaissance Technologies and John Labanowski’s Brenham Capital Management.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Gran Tierra Energy Inc. (NYSE:GTE) but similarly valued. We will take a look at NMI Holdings Inc (NASDAQ:NMIH), PIMCO Corporate&Income Opportunity Fund (NYSE:PTY), Audentes Therapeutics, Inc. (NASDAQ:BOLD), and Boingo Wireless Inc (NASDAQ:WIFI). This group of stocks’ market valuations match GTE’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NMIH | 12 | 196799 | -3 |
| PTY | 2 | 627 | -1 |
| BOLD | 17 | 402777 | -6 |
| WIFI | 17 | 201486 | 4 |
| Average | 12 | 200422 | -1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $200 million. That figure was $395 million in GTE’s case. Audentes Therapeutics, Inc. (NASDAQ:BOLD) is the most popular stock in this table. On the other hand PIMCO Corporate&Income Opportunity Fund (NYSE:PTY) is the least popular one with only 2 bullish hedge fund positions. Gran Tierra Energy Inc. (NYSE:GTE) 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. In this regard BOLD might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.