Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Gladstone Capital Corporation (NASDAQ:GLAD).
Is GLAD a good stock to buy? The best stock pickers were taking a bearish view. The number of long hedge fund bets were cut by 1 recently. Gladstone Capital Corporation (NASDAQ:GLAD) was in 5 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 7. Our calculations also showed that GLAD isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 6 hedge funds in our database with GLAD positions at the end of the fourth quarter.
In today’s marketplace there are several formulas investors employ to appraise their stock investments. A couple of the most under-the-radar formulas are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the top picks of the top fund managers can outpace their index-focused peers by a significant margin (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .
Peter Rathjens of Arrowstreet Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $23 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let’s take a glance at the key hedge fund action regarding Gladstone Capital Corporation (NASDAQ:GLAD).
Do Hedge Funds Think GLAD Is A Good Stock To Buy Now?
At the end of March, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from one quarter earlier. By comparison, 4 hedge funds held shares or bullish call options in GLAD a year ago. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
Among these funds, McKinley Capital Management held the most valuable stake in Gladstone Capital Corporation (NASDAQ:GLAD), which was worth $0.9 million at the end of the fourth quarter. On the second spot was Arrowstreet Capital which amassed $0.5 million worth of shares. Citadel Investment Group, D E Shaw, and Two Sigma Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position McKinley Capital Management allocated the biggest weight to Gladstone Capital Corporation (NASDAQ:GLAD), around 0.07% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, designating 0.0006 percent of its 13F equity portfolio to GLAD.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Citadel Investment Group. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified GLAD as a viable investment and initiated a position in the stock.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Gladstone Capital Corporation (NASDAQ:GLAD) but similarly valued. We will take a look at Forian Inc. (NASDAQ:FORA), CorMedix Inc. (NYSE:CRMD), The First Bancorp, Inc. (NASDAQ:FNLC), Pure Cycle Corporation (NASDAQ:PCYO), Lifetime Brands Inc (NASDAQ:LCUT), Carrols Restaurant Group, Inc. (NASDAQ:TAST), and PolyMet Mining Corp. (NYSE:PLM). This group of stocks’ market values resemble GLAD’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FORA | 2 | 1761 | 2 |
| CRMD | 3 | 17555 | -3 |
| FNLC | 1 | 4384 | 0 |
| PCYO | 10 | 69664 | 1 |
| LCUT | 4 | 27149 | -3 |
| TAST | 13 | 20322 | 1 |
| PLM | 6 | 2131 | 2 |
| Average | 5.6 | 20424 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.6 hedge funds with bullish positions and the average amount invested in these stocks was $20 million. That figure was $2 million in GLAD’s case. Carrols Restaurant Group, Inc. (NASDAQ:TAST) is the most popular stock in this table. On the other hand The First Bancorp, Inc. (NASDAQ:FNLC) is the least popular one with only 1 bullish hedge fund positions. Gladstone Capital Corporation (NASDAQ:GLAD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for GLAD is 42.1. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th and still beat the market by 6.1 percentage points. A small number of hedge funds were also right about betting on GLAD as the stock returned 13.2% since the end of the first quarter (through 6/18) and outperformed the market by an even larger margin.
Follow Gladstone Capital Corp (NASDAQ:GLAD)
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Disclosure: None. This article was originally published at Insider Monkey.
