Is Global Indemnity Group LLC (GBLI) Going to Burn These Hedge Funds?

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 September. At Insider Monkey, we follow nearly 900 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 Global Indemnity Group LLC (NASDAQ:GBLI), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Is Global Indemnity Group LLC (NASDAQ:GBLI) a bargain? Money managers were getting less optimistic. The number of bullish hedge fund bets were trimmed by 3 lately. Global Indemnity Group LLC (NASDAQ:GBLI) was in 3 hedge funds’ portfolios at the end of March. The all time high for this statistic is 7. Our calculations also showed that GBLI isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

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At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $26 biotech stock for $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. Now let’s review the fresh hedge fund action regarding Global Indemnity Group LLC (NASDAQ:GBLI).

Do Hedge Funds Think GBLI Is A Good Stock To Buy Now?

Heading into the second quarter of 2021, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of -50% from the fourth quarter of 2020. By comparison, 4 hedge funds held shares or bullish call options in GBLI a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Harbert Management held the most valuable stake in Global Indemnity Group LLC (NASDAQ:GBLI), which was worth $25.2 million at the end of the fourth quarter. On the second spot was Springhouse Capital Management which amassed $22.4 million worth of shares. Renaissance Technologies was 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 Springhouse Capital Management allocated the biggest weight to Global Indemnity Group LLC (NASDAQ:GBLI), around 22.26% of its 13F portfolio. Harbert Management is also relatively very bullish on the stock, earmarking 11.89 percent of its 13F equity portfolio to GBLI.

Because Global Indemnity Group LLC (NASDAQ:GBLI) has faced falling interest from the smart money, it’s easy to see that there were a few hedge funds who were dropping their positions entirely by the end of the first quarter. Intriguingly, Jeffrey Bronchick’s Cove Street Capital cut the largest investment of the “upper crust” of funds followed by Insider Monkey, valued at close to $4.2 million in stock. Ben Levine, Andrew Manuel and Stefan Renold’s fund, LMR Partners, also dumped its stock, about $0.3 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 3 funds by the end of the first quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Global Indemnity Group LLC (NASDAQ:GBLI) but similarly valued. These stocks are Freeline Therapeutics Holdings plc (NASDAQ:FRLN), Verastem Inc (NASDAQ:VSTM), Genco Shipping & Trading Limited (NYSE:GNK), Metropolitan Bank Holding Corp. (NYSE:MCB), Vishay Precision Group Inc (NYSE:VPG), Hall of Fame Resort & Entertainment Company (NASDAQ:HOFV), and Sientra Inc (NASDAQ:SIEN). All of these stocks’ market caps are similar to GBLI’s market cap.

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As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $79 million. That figure was $50 million in GBLI’s case. Genco Shipping & Trading Limited (NYSE:GNK) is the most popular stock in this table. On the other hand Freeline Therapeutics Holdings plc (NASDAQ:FRLN) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Global Indemnity Group LLC (NASDAQ:GBLI) is even less popular than FRLN. Our overall hedge fund sentiment score for GBLI is 14.9. 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. Hedge funds dodged a bullet by taking a bearish stance towards GBLI. Our calculations showed that the top 10 most popular hedge fund stocks returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th but managed to beat the market again by 3.3 percentage points. Unfortunately GBLI wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was very bearish); GBLI investors were disappointed as the stock returned 2.8% since the end of the first quarter (through 6/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

Disclosure: None. This article was originally published at Insider Monkey.