Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of March. At Insider Monkey, we follow nearly 750 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Gain Capital Holdings Inc (NYSE:GCAP), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Hedge fund interest in Gain Capital Holdings Inc (NYSE:GCAP) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Northwest Pipe Company (NASDAQ:NWPX), PhaseBio Pharmaceuticals, Inc. (NASDAQ:PHAS), and Galectin Therapeutics Inc. (NASDAQ:GALT) to gather more data points.
Why do we pay any attention at all to hedge fund sentiment? 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 40 percentage points since May 2014 through May 30, 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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Matthew Hulsizer of PEAK6 Capital
Let’s take a peek at the recent hedge fund action regarding Gain Capital Holdings Inc (NYSE:GCAP).
How are hedge funds trading Gain Capital Holdings Inc (NYSE:GCAP)?
At the end of the first quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards GCAP over the last 15 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
Among these funds, Rima Senvest Management held the most valuable stake in Gain Capital Holdings Inc (NYSE:GCAP), which was worth $18.4 million at the end of the first quarter. On the second spot was Renaissance Technologies which amassed $3.5 million worth of shares. Moreover, Arrowstreet Capital, CSat Investment Advisory, and Two Sigma Advisors were also bullish on Gain Capital Holdings Inc (NYSE:GCAP), allocating a large percentage of their portfolios to this stock.
Since Gain Capital Holdings Inc (NYSE:GCAP) has faced falling interest from the entirety of the hedge funds we track, we can see that there were a few money managers that decided to sell off their full holdings in the third quarter. It’s worth mentioning that Glenn Russell Dubin’s Highbridge Capital Management dumped the biggest position of the “upper crust” of funds followed by Insider Monkey, totaling close to $6.4 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund dropped about $1.3 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks similar to Gain Capital Holdings Inc (NYSE:GCAP). We will take a look at Northwest Pipe Company (NASDAQ:NWPX), PhaseBio Pharmaceuticals, Inc. (NASDAQ:PHAS), Galectin Therapeutics Inc. (NASDAQ:GALT), and Farmland Partners Inc (NYSE:FPI). All of these stocks’ market caps are similar to GCAP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NWPX | 10 | 39478 | 3 |
| PHAS | 4 | 20675 | -2 |
| GALT | 7 | 3665 | 3 |
| FPI | 9 | 7945 | 1 |
| Average | 7.5 | 17941 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.5 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $26 million in GCAP’s case. Northwest Pipe Company (NASDAQ:NWPX) is the most popular stock in this table. On the other hand PhaseBio Pharmaceuticals, Inc. (NASDAQ:PHAS) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Gain Capital Holdings Inc (NYSE:GCAP) is more popular among hedge funds. 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 GCAP wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on GCAP were disappointed as the stock returned -38.7% during the same 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 in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
