Is GlobalSCAPE, Inc. (GSB) A Good Stock To Buy?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of GlobalSCAPE, Inc. (NYSE:GSB) based on that data and determine whether they were really smart about the stock.

Is GlobalSCAPE, Inc. (NYSE:GSB) an outstanding stock to buy now? The smart money was becoming less hopeful. The number of long hedge fund bets fell by 2 in recent months. Our calculations also showed that GSB isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Peter Rathjens of Arrowstreet Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a glance at the latest hedge fund action regarding GlobalSCAPE, Inc. (NYSE:GSB).

What does smart money think about GlobalSCAPE, Inc. (NYSE:GSB)?

At the end of the first quarter, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -15% from the fourth quarter of 2019. On the other hand, there were a total of 2 hedge funds with a bullish position in GSB a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey,  Renaissance Technologies has the number one position in GlobalSCAPE, Inc. (NYSE:GSB), worth close to $9.2 million, comprising less than 0.1%% of its total 13F portfolio. The second largest stake is held by Millennium Management, managed by Israel Englander, which holds a $0.9 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other members of the smart money that are bullish include Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, John Overdeck and David Siegel’s Two Sigma Advisors and Bradley Louis Radoff’s Fondren Management. In terms of the portfolio weights assigned to each position Fondren Management allocated the biggest weight to GlobalSCAPE, Inc. (NYSE:GSB), around 1.02% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to GSB.

Due to the fact that GlobalSCAPE, Inc. (NYSE:GSB) has witnessed declining sentiment from the entirety of the hedge funds we track, logic holds that there is a sect of funds who were dropping their full holdings by the end of the first quarter. Interestingly, Benjamin A. Smith’s Laurion Capital Management dumped the biggest stake of the “upper crust” of funds watched by Insider Monkey, worth close to $0.4 million in stock, and David Nguyen and Nancy Oh’s One68 Global Capital was right behind this move, as the fund dropped about $0.2 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 2 funds by the end of the first quarter.

Let’s also examine hedge fund activity in other stocks similar to GlobalSCAPE, Inc. (NYSE:GSB). We will take a look at Reliant Bancorp, Inc. (NASDAQ:RBNC), MainStreet Bancshares, Inc. (NASDAQ:MNSB), First Business Financial Services Inc (NASDAQ:FBIZ), and BankFinancial Corporation (NASDAQ:BFIN). This group of stocks’ market valuations are closest to GSB’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 3.5 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $13 million in GSB’s case. Reliant Bancorp, Inc. (NASDAQ:RBNC) is the most popular stock in this table. On the other hand MainStreet Bancshares, Inc. (NASDAQ:MNSB) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks GlobalSCAPE, Inc. (NYSE:GSB) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on GSB as the stock returned 36.9% in Q2 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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