Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 of 2018 due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average over the long-term. The top 20 stocks among hedge funds beat the S&P 500 Index ETFs by nearly 10 percentage points during the first 11 months of 2019. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Gran Tierra Energy Inc. (NYSEAMEX:GTE) from the perspective of those elite funds.
Hedge fund interest in Gran Tierra Energy Inc. (NYSEAMEX:GTE) 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 Shoe Carnival, Inc. (NASDAQ:SCVL), Entercom Communications Corp. (NYSE:ETM), and Merchants Bancorp (NASDAQ:MBIN) to gather more data points. Our calculations also showed that GTE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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’ 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Jonathan Barrett of Luminus Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s review the new hedge fund action regarding Gran Tierra Energy Inc. (NYSEAMEX:GTE).
What have hedge funds been doing with Gran Tierra Energy Inc. (NYSEAMEX:GTE)?
Heading into the fourth quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2019. On the other hand, there were a total of 16 hedge funds with a bullish position in GTE a year ago. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
Among these funds, GMT Capital held the most valuable stake in Gran Tierra Energy Inc. (NYSEAMEX:GTE), which was worth $95.6 million at the end of the third quarter. On the second spot was Luminus Management which amassed $37.3 million worth of shares. Moerus Capital Management, Renaissance Technologies, and D E Shaw 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 Moerus Capital Management allocated the biggest weight to Gran Tierra Energy Inc. (NYSEAMEX:GTE), around 5.42% of its 13F portfolio. GMT Capital is also relatively very bullish on the stock, dishing out 3.53 percent of its 13F equity portfolio to GTE.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Sprott Asset Management. 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 only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Horizon Asset Management).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Gran Tierra Energy Inc. (NYSEAMEX:GTE) but similarly valued. We will take a look at Shoe Carnival, Inc. (NASDAQ:SCVL), Entercom Communications Corp. (NYSE:ETM), Merchants Bancorp (NASDAQ:MBIN), and Chico’s FAS, Inc. (NYSE:CHS). This group of stocks’ market caps resemble GTE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SCVL | 15 | 101523 | 1 |
| ETM | 18 | 46488 | -1 |
| MBIN | 8 | 8102 | 2 |
| CHS | 14 | 57946 | 1 |
| Average | 13.75 | 53515 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $54 million. That figure was $160 million in GTE’s case. Entercom Communications Corp. (NYSE:ETM) is the most popular stock in this table. On the other hand Merchants Bancorp (NASDAQ:MBIN) is the least popular one with only 8 bullish hedge fund positions. Gran Tierra Energy Inc. (NYSEAMEX:GTE) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately GTE wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); GTE investors were disappointed as the stock returned -18.4% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
