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 quarter. 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 Geospace Technologies Corp (NASDAQ:GEOS) to find out whether it was one of their high conviction long-term ideas.
Is Geospace Technologies Corp (NASDAQ:GEOS) a bargain? Money managers are reducing their bets on the stock. The number of long hedge fund positions retreated by 1 recently. Our calculations also showed that GEOS isn’t among the 30 most popular stocks among hedge funds.
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 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 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.
Let’s go over the key hedge fund action surrounding Geospace Technologies Corp (NASDAQ:GEOS).
How have hedgies been trading Geospace Technologies Corp (NASDAQ:GEOS)?
At Q1’s end, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in GEOS over the last 15 quarters. So, let’s check out 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, Rutabaga Capital Management, managed by Peter Schliemann, holds the number one position in Geospace Technologies Corp (NASDAQ:GEOS). Rutabaga Capital Management has a $5.6 million position in the stock, comprising 1.5% of its 13F portfolio. The second most bullish fund manager is Millennium Management, managed by Israel Englander, which holds a $2.2 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining peers with similar optimism include Jim Simons’s Renaissance Technologies, D. E. Shaw’s D E Shaw and Michael Gelband’s ExodusPoint Capital.
Because Geospace Technologies Corp (NASDAQ:GEOS) has witnessed declining sentiment from hedge fund managers, we can see that there was a specific group of fund managers that elected to cut their full holdings heading into Q3. It’s worth mentioning that Ken Griffin’s Citadel Investment Group cut the biggest stake of the “upper crust” of funds monitored by Insider Monkey, valued at an estimated $0.1 million in stock. Gregory Fraser, Rudolph Kluiber, and Timothy Krochuk’s fund, GRT Capital Partners, also said goodbye to its stock, about $0.1 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 1 funds heading into Q3.
Let’s go over hedge fund activity in other stocks similar to Geospace Technologies Corp (NASDAQ:GEOS). These stocks are Orrstown Financial Services, Inc. (NASDAQ:ORRF), First Business Financial Services Inc (NASDAQ:FBIZ), C&F Financial Corp (NASDAQ:CFFI), and Aratana Therapeutics Inc (NASDAQ:PETX). All of these stocks’ market caps match GEOS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ORRF | 4 | 8075 | -1 |
| FBIZ | 2 | 4869 | 0 |
| CFFI | 2 | 7828 | 0 |
| PETX | 11 | 41252 | -1 |
| Average | 4.75 | 15506 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.75 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $12 million in GEOS’s case. Aratana Therapeutics Inc (NASDAQ:PETX) is the most popular stock in this table. On the other hand First Business Financial Services Inc (NASDAQ:FBIZ) is the least popular one with only 2 bullish hedge fund positions. Geospace Technologies Corp (NASDAQ:GEOS) is not the most popular stock in this group but hedge fund interest is still above average. 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 GEOS, though not to the same extent, as the stock returned 4% during the same time frame and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
