Hedge fund managers like David Einhorn, Bill Ackman, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Green Brick Partners Inc (NASDAQ:GRBK).
Green Brick Partners Inc (NASDAQ:GRBK) investors should be aware of a decrease in activity from the world’s largest hedge funds lately. GRBK was in 10 hedge funds’ portfolios at the end of March. There were 14 hedge funds in our database with GRBK positions at the end of the previous quarter. Our calculations also showed that GRBK isn’t among the 30 most popular stocks among hedge funds.
If you’d ask most shareholders, hedge funds are perceived as slow, old financial vehicles of years past. While there are greater than 8000 funds with their doors open today, We choose to focus on the elite of this group, approximately 750 funds. These investment experts shepherd the majority of the smart money’s total capital, and by tailing their finest equity investments, Insider Monkey has uncovered various investment strategies that have historically surpassed Mr. Market. Insider Monkey’s flagship hedge fund strategy defeated the S&P 500 index by around 5 percentage points per year since its inception in May 2014 through June 18th. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 28.2% since February 2017 (through June 18th) even though the market was up nearly 30% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 8.2% in a month whereas our long picks outperformed the market by 2.5 percentage points in this volatile 5 week period (our long picks also beat the market by 15 percentage points so far this year).
We’re going to take a gander at the key hedge fund action encompassing Green Brick Partners Inc (NASDAQ:GRBK).
What have hedge funds been doing with Green Brick Partners Inc (NASDAQ:GRBK)?
At the end of the first quarter, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -29% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards GRBK over the last 15 quarters. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
More specifically, Greenlight Capital was the largest shareholder of Green Brick Partners Inc (NASDAQ:GRBK), with a stake worth $211 million reported as of the end of March. Trailing Greenlight Capital was Ariel Investments, which amassed a stake valued at $17.2 million. Stadium Capital Management, Birch Run Capital, and SCW Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
Judging by the fact that Green Brick Partners Inc (NASDAQ:GRBK) has faced declining sentiment from hedge fund managers, we can see that there lies a certain “tier” of funds that slashed their full holdings in the third quarter. At the top of the heap, Israel Englander’s Millennium Management dropped the biggest stake of the 700 funds monitored by Insider Monkey, worth about $0.2 million in stock, and John Overdeck and David Siegel’s Two Sigma Advisors was right behind this move, as the fund said goodbye to about $0.2 million worth. These moves are interesting, as total hedge fund interest fell by 4 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Green Brick Partners Inc (NASDAQ:GRBK) but similarly valued. These stocks are Heritage Insurance Holdings Inc (NYSE:HRTG), Atlantic Capital Bancshares, Inc. (NASDAQ:ACBI), RTI Surgical Holdings, Inc. (NASDAQ:RTIX), and Akorn, Inc. (NASDAQ:AKRX). This group of stocks’ market values resemble GRBK’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HRTG | 9 | 33157 | 3 |
| ACBI | 12 | 76229 | -2 |
| RTIX | 14 | 41155 | 2 |
| AKRX | 16 | 64437 | 1 |
| Average | 12.75 | 53745 | 1 |
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 $54 million. That figure was $276 million in GRBK’s case. Akorn, Inc. (NASDAQ:AKRX) is the most popular stock in this table. On the other hand Heritage Insurance Holdings Inc (NYSE:HRTG) is the least popular one with only 9 bullish hedge fund positions. Green Brick Partners Inc (NASDAQ:GRBK) 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 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. Unfortunately GRBK wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); GRBK investors were disappointed as the stock returned 2.6% during the same time period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
