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In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. With this in mind let’s see whether Global Net Lease, Inc. (NYSE:GNL) makes for a good investment at the moment. We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Is Global Net Lease, Inc. (NYSE:GNL) a good investment right now? The smart money is reducing their bets on the stock. The number of long hedge fund positions were cut by 5 recently. Our calculations also showed that GNL isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). GNL was in 10 hedge funds’ portfolios at the end of December. There were 15 hedge funds in our database with GNL positions at the end of the previous quarter.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Dmitry Balyasny of Balyasny Asset Management
We leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve and other Central Banks are tripping over each other to print more money. As a result, we believe gold stocks will outperform fixed income ETFs in the long-term. So we are checking out investment opportunities like this one. We are probably at the peak of the COVID-19 pandemic, so we check out this biotech investor’s coronavirus picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences (by the way watch this video if you want to hear one of the best healthcare hedge fund manager’s coronavirus analysis). Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s review the recent hedge fund action encompassing Global Net Lease, Inc. (NYSE:GNL).
How have hedgies been trading Global Net Lease, Inc. (NYSE:GNL)?
At Q4’s end, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of -33% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GNL over the last 18 quarters. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Global Net Lease, Inc. (NYSE:GNL), which was worth $24.8 million at the end of the third quarter. On the second spot was Winton Capital Management which amassed $10.8 million worth of shares. LDR Capital, Citadel Investment Group, and Balyasny Asset Management 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 LDR Capital allocated the biggest weight to Global Net Lease, Inc. (NYSE:GNL), around 4.05% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, designating 0.15 percent of its 13F equity portfolio to GNL.
Because Global Net Lease, Inc. (NYSE:GNL) has experienced falling interest from hedge fund managers, we can see that there exists a select few hedge funds who sold off their full holdings heading into Q4. Intriguingly, Israel Englander’s Millennium Management sold off the biggest position of the “upper crust” of funds monitored by Insider Monkey, totaling an estimated $4.1 million in call options, and Matthew Hulsizer’s PEAK6 Capital Management was right behind this move, as the fund said goodbye to about $1.2 million worth. These transactions are important to note, as total hedge fund interest fell by 5 funds heading into Q4.
Let’s check out hedge fund activity in other stocks similar to Global Net Lease, Inc. (NYSE:GNL). We will take a look at Jagged Peak Energy Inc. (NYSE:JAG), Harsco Corporation (NYSE:HSC), Mueller Industries, Inc. (NYSE:MLI), and PagerDuty, Inc. (NYSE:PD). This group of stocks’ market valuations match GNL’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| JAG | 11 | 146367 | -4 |
| HSC | 21 | 181577 | 3 |
| MLI | 21 | 215236 | 2 |
| PD | 15 | 33030 | 4 |
| Average | 17 | 144053 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $144 million. That figure was $54 million in GNL’s case. Harsco Corporation (NYSE:HSC) is the most popular stock in this table. On the other hand Jagged Peak Energy Inc. (NYSE:JAG) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Global Net Lease, Inc. (NYSE:GNL) is even less popular than JAG. Hedge funds dodged a bullet by taking a bearish stance towards GNL. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but managed to beat the market by 4.2 percentage points. Unfortunately GNL wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); GNL investors were disappointed as the stock returned -37% during the same time period 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 most of these stocks already outperformed the market so far in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
