The market has been volatile in the last few months as the Federal Reserve finalized its rate cuts and uncertainty looms over trade negotiations with China. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points over the last 12 months. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure since summer months, though some funds increased their exposure dramatically at the end of Q3 and the beginning of Q4. In this article, we analyze what the smart money thinks of Gaiam, Inc. (NASDAQ:GAIA) and find out how it is affected by hedge funds’ moves.
Gaiam, Inc. (NASDAQ:GAIA) was in 6 hedge funds’ portfolios at the end of the third quarter of 2019. GAIA has experienced a decrease in support from the world’s most elite money managers lately. There were 9 hedge funds in our database with GAIA holdings at the end of the previous quarter. Our calculations also showed that GAIA 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.
If you’d ask most shareholders, hedge funds are perceived as worthless, outdated financial vehicles of yesteryear. While there are greater than 8000 funds in operation today, Our researchers choose to focus on the masters of this group, approximately 750 funds. It is estimated that this group of investors oversee bulk of the hedge fund industry’s total capital, and by monitoring their inimitable investments, Insider Monkey has uncovered numerous investment strategies that have historically outrun the broader indices. Insider Monkey’s flagship short hedge fund strategy defeated 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 .
Chuck Royce of Royce & Associates
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now we’re going to take a peek at the key hedge fund action surrounding Gaiam, Inc. (NASDAQ:GAIA).
Hedge fund activity in Gaiam, Inc. (NASDAQ:GAIA)
At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GAIA over the last 17 quarters. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Ariel Investments, managed by John W. Rogers, holds the biggest position in Gaiam, Inc. (NASDAQ:GAIA). Ariel Investments has a $5.5 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Royce & Associates, led by Chuck Royce, holding a $3.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions consist of Peter A. Wright’s P.A.W. Capital Partners, Gregory Fraser, Rudolph Kluiber, and Timothy Krochuk’s GRT Capital Partners. In terms of the portfolio weights assigned to each position P.A.W. Capital Partners allocated the biggest weight to Gaiam, Inc. (NASDAQ:GAIA), around 2.24% of its 13F portfolio. GRT Capital Partners is also relatively very bullish on the stock, earmarking 0.6 percent of its 13F equity portfolio to GAIA.
Due to the fact that Gaiam, Inc. (NASDAQ:GAIA) has faced a decline in interest from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of funds who were dropping their entire stakes last quarter. Intriguingly, Nick Thakore’s Diametric Capital dumped the biggest stake of the 750 funds monitored by Insider Monkey, valued at close to $0.4 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund said goodbye to about $0.3 million worth. These transactions are intriguing to say the least, as total 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 Gaiam, Inc. (NASDAQ:GAIA) but similarly valued. These stocks are Nantkwest Inc (NASDAQ:NK), Novavax, Inc. (NASDAQ:NVAX), PhaseBio Pharmaceuticals, Inc. (NASDAQ:PHAS), and Rhinebeck Bancorp, Inc. (NASDAQ:RBKB). This group of stocks’ market values match GAIA’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NK | 6 | 3375 | -1 |
| NVAX | 7 | 1967 | 4 |
| PHAS | 10 | 16101 | 2 |
| RBKB | 2 | 7573 | 0 |
| Average | 6.25 | 7254 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.25 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $13 million in GAIA’s case. PhaseBio Pharmaceuticals, Inc. (NASDAQ:PHAS) is the most popular stock in this table. On the other hand Rhinebeck Bancorp, Inc. (NASDAQ:RBKB) is the least popular one with only 2 bullish hedge fund positions. Gaiam, Inc. (NASDAQ:GAIA) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on GAIA as the stock returned 28% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
