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.
Is GreenTree Hospitality Group Ltd. (NYSE:GHG) a buy here? Hedge funds are selling. The number of bullish hedge fund bets decreased by 4 lately. Our calculations also showed that GHG isn’t among the 30 most popular stocks among hedge funds (see the video below). GHG was in 5 hedge funds’ portfolios at the end of the second quarter of 2019. There were 9 hedge funds in our database with GHG positions at the end of the previous quarter.
Video: Click the image to 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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a glance at the fresh hedge fund action encompassing GreenTree Hospitality Group Ltd. (NYSE:GHG).
Hedge fund activity in GreenTree Hospitality Group Ltd. (NYSE:GHG)
Heading into the third quarter of 2019, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of -44% from the first quarter of 2019. By comparison, 11 hedge funds held shares or bullish call options in GHG a year ago. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
More specifically, Sylebra Capital Management was the largest shareholder of GreenTree Hospitality Group Ltd. (NYSE:GHG), with a stake worth $11.9 million reported as of the end of March. Trailing Sylebra Capital Management was Dalton Investments, which amassed a stake valued at $10.7 million. Guardian Point Capital, Renaissance Technologies, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
Judging by the fact that GreenTree Hospitality Group Ltd. (NYSE:GHG) has experienced declining sentiment from hedge fund managers, we can see that there were a few funds who were dropping their positions entirely last quarter. Intriguingly, Glenn Russell Dubin’s Highbridge Capital Management dropped the largest stake of the “upper crust” of funds monitored by Insider Monkey, comprising an estimated $2.1 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also sold off its stock, about $0.7 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 4 funds last quarter.
Let’s check out hedge fund activity in other stocks similar to GreenTree Hospitality Group Ltd. (NYSE:GHG). These stocks are B&G Foods, Inc. (NYSE:BGS), Virtusa Corporation (NASDAQ:VRTU), Grupo Simec S.A.B. de C.V. (NYSE:SIM), and Alector, Inc. (NASDAQ:ALEC). All of these stocks’ market caps match GHG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BGS | 20 | 121608 | 1 |
| VRTU | 13 | 56606 | 3 |
| SIM | 1 | 2045 | -1 |
| ALEC | 13 | 347529 | 1 |
| Average | 11.75 | 131947 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $132 million. That figure was $32 million in GHG’s case. B&G Foods, Inc. (NYSE:BGS) is the most popular stock in this table. On the other hand Grupo Simec S.A.B. de C.V. (NYSE:SIM) is the least popular one with only 1 bullish hedge fund positions. GreenTree Hospitality Group Ltd. (NYSE:GHG) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately GHG wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); GHG investors were disappointed as the stock returned -23.1% during the third 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 many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
