Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips 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. 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 Globalstar, Inc. (NYSE:GSAT) to find out whether it was one of their high conviction long-term ideas.
Globalstar, Inc. (NYSE:GSAT) investors should be aware of a decrease in activity from the world’s largest hedge funds in recent months. Our calculations also showed that gsat isn’t among the 30 most popular stocks among hedge funds.
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 32 percentage points since May 2014 through March 12, 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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to review the latest hedge fund action encompassing Globalstar, Inc. (NYSE:GSAT).
What does the smart money think about Globalstar, Inc. (NYSE:GSAT)?
At the end of the fourth quarter, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -45% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards GSAT over the last 14 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
More specifically, Mudrick Capital Management was the largest shareholder of Globalstar, Inc. (NYSE:GSAT), with a stake worth $64 million reported as of the end of December. Trailing Mudrick Capital Management was Warlander Asset Management, which amassed a stake valued at $27.5 million. Steelhead Partners, 683 Capital Partners, and Mason Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
Because Globalstar, Inc. (NYSE:GSAT) has experienced bearish sentiment from the aggregate hedge fund industry, we can see that there was a specific group of hedgies that elected to cut their entire stakes last quarter. It’s worth mentioning that Andy Rebak and Michael Scott’s Farmstead Capital Management dropped the largest stake of the 700 funds monitored by Insider Monkey, comprising close to $3.2 million in stock, and Michael Kao’s Akanthos Capital was right behind this move, as the fund said goodbye to about $2.9 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 10 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Globalstar, Inc. (NYSE:GSAT). These stocks are MBIA Inc. (NYSE:MBI), Republic Bancorp, Inc. (NASDAQ:RBCAA), Kforce Inc. (NASDAQ:KFRC), and Connecticut Water Service, Inc. (NASDAQ:CTWS). This group of stocks’ market valuations resemble GSAT’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MBI | 18 | 277243 | -1 |
| RBCAA | 7 | 14532 | 0 |
| KFRC | 21 | 74074 | 1 |
| CTWS | 5 | 21505 | -1 |
| Average | 12.75 | 96839 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $97 million. That figure was $141 million in GSAT’s case. Kforce Inc. (NASDAQ:KFRC) is the most popular stock in this table. On the other hand Connecticut Water Service, Inc. (NASDAQ:CTWS) is the least popular one with only 5 bullish hedge fund positions. Globalstar, Inc. (NYSE:GSAT) 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. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately GSAT wasn’t nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); GSAT investors were disappointed as the stock returned -32.8% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
