Hedge funds are known to underperform the bull markets but that’s not because they are bad at investing. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. Hedge funds underperform because they are hedged. The Standard and Poor’s 500 Total Return Index ETFs returned 27.5% through the end of November. Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 37.4% during the same period. An average long/short hedge fund returned only a fraction of this due to the hedges they implement and the large fees they charge. Our research covering the last 18 years indicates that investors can outperform the market by imitating hedge funds’ consensus stock picks rather than directly investing in hedge funds. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Gulfport Energy Corporation (NASDAQ:GPOR).
Is Gulfport Energy Corporation (NASDAQ:GPOR) the right pick for your portfolio? Money managers are getting less optimistic. The number of bullish hedge fund bets were cut by 3 in recent months. Our calculations also showed that GPOR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). GPOR was in 14 hedge funds’ portfolios at the end of the third quarter of 2019. There were 17 hedge funds in our database with GPOR 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.
If you’d ask most stock holders, hedge funds are viewed as underperforming, outdated financial tools of years past. While there are more than 8000 funds in operation today, We hone in on the leaders of this group, around 750 funds. It is estimated that this group of investors oversee the lion’s share of the smart money’s total asset base, and by paying attention to their unrivaled investments, Insider Monkey has brought to light many investment strategies that have historically outstripped Mr. Market. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
David E. Shaw of D.E. Shaw
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. We’re going to take a glance at the fresh hedge fund action surrounding Gulfport Energy Corporation (NASDAQ:GPOR).
What have hedge funds been doing with Gulfport Energy Corporation (NASDAQ:GPOR)?
At Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of -18% from the previous quarter. The graph below displays the number of hedge funds with bullish position in GPOR over the last 17 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
The largest stake in Gulfport Energy Corporation (NASDAQ:GPOR) was held by Firefly Value Partners, which reported holding $42.7 million worth of stock at the end of September. It was followed by Shah Capital Management with a $10.8 million position. Other investors bullish on the company included Citadel Investment Group, D E Shaw, and Hawk Ridge Management. In terms of the portfolio weights assigned to each position Firefly Value Partners allocated the biggest weight to Gulfport Energy Corporation (NASDAQ:GPOR), around 6.55% of its 13F portfolio. Shah Capital Management is also relatively very bullish on the stock, designating 5.85 percent of its 13F equity portfolio to GPOR.
Judging by the fact that Gulfport Energy Corporation (NASDAQ:GPOR) has witnessed falling interest from the aggregate hedge fund industry, we can see that there was a specific group of hedgies who were dropping their full holdings last quarter. It’s worth mentioning that Ryan Heslop and Ariel Warszawski’s Firefly Value Partners dropped the biggest investment of the “upper crust” of funds monitored by Insider Monkey, valued at an estimated $12.8 million in stock, and Clint Carlson’s Carlson Capital was right behind this move, as the fund dropped about $3 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 3 funds last quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Gulfport Energy Corporation (NASDAQ:GPOR) but similarly valued. We will take a look at Intrepid Potash, Inc. (NYSE:IPI), Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB), Weidai Ltd. (NYSE:WEI), and Carrols Restaurant Group, Inc. (NASDAQ:TAST). This group of stocks’ market valuations are closest to GPOR’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IPI | 14 | 20221 | -2 |
| RRGB | 15 | 46746 | 3 |
| WEI | 1 | 240 | 0 |
| TAST | 16 | 84722 | -4 |
| Average | 11.5 | 37982 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $38 million. That figure was $73 million in GPOR’s case. Carrols Restaurant Group, Inc. (NASDAQ:TAST) is the most popular stock in this table. On the other hand Weidai Ltd. (NYSE:WEI) is the least popular one with only 1 bullish hedge fund positions. Gulfport Energy Corporation (NASDAQ:GPOR) 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 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 GPOR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on GPOR were disappointed as the stock returned -12.5% during the fourth quarter (through the end of November) 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 this year.
Disclosure: None. This article was originally published at Insider Monkey.
