Reputable billionaire investors such as Jim Simons, Cliff Asness and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Gran Tierra Energy Inc. (NYSE:GTE) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 16 hedge funds’ portfolios at the end of the fourth quarter of 2018. At the end of this article we will also compare GTE to other stocks including Athenex, Inc. (NASDAQ:ATNX), Interface, Inc. (NASDAQ:TILE), and TPI Composites, Inc. (NASDAQ:TPIC) to get a better sense of its popularity.
In the financial world there are a large number of signals shareholders can use to evaluate stocks. A duo of the most useful signals are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the best picks of the top investment managers can outpace the market by a significant margin (see the details here).
Let’s take a look at the key hedge fund action surrounding Gran Tierra Energy Inc. (NYSE:GTE).
How have hedgies been trading Gran Tierra Energy Inc. (NYSE:GTE)?
Heading into the first quarter of 2019, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2018. On the other hand, there were a total of 12 hedge funds with a bullish position in GTE a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
The largest stake in Gran Tierra Energy Inc. (NYSE:GTE) was held by GMT Capital, which reported holding $147.7 million worth of stock at the end of December. It was followed by Luminus Management with a $50.2 million position. Other investors bullish on the company included Moerus Capital Management, Arrowstreet Capital, and Renaissance Technologies.
Because Gran Tierra Energy Inc. (NYSE:GTE) has faced bearish sentiment from the aggregate hedge fund industry, we can see that there lies a certain “tier” of hedge funds that elected to cut their positions entirely by the end of the third quarter. Interestingly, John Labanowski’s Brenham Capital Management dropped the biggest position of the “upper crust” of funds tracked by Insider Monkey, totaling close to $14.2 million in stock, and Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital was right behind this move, as the fund sold off about $0.5 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Gran Tierra Energy Inc. (NYSE:GTE) but similarly valued. These stocks are Athenex, Inc. (NASDAQ:ATNX), Interface, Inc. (NASDAQ:TILE), TPI Composites, Inc. (NASDAQ:TPIC), and Laredo Petroleum Inc (NYSE:LPI). This group of stocks’ market values resemble GTE’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ATNX | 10 | 67768 | 3 |
| TILE | 16 | 59233 | -1 |
| TPIC | 13 | 89898 | -4 |
| LPI | 14 | 195611 | -6 |
| Average | 13.25 | 103128 | -2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $103 million. That figure was $250 million in GTE’s case. Interface, Inc. (NASDAQ:TILE) is the most popular stock in this table. On the other hand Athenex, Inc. (NASDAQ:ATNX) is the least popular one with only 10 bullish hedge fund positions. Gran Tierra Energy Inc. (NYSE:GTE) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately GTE wasn’t nearly as popular as these 15 stock and hedge funds that were betting on GTE were disappointed as the stock returned 14.3% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
