Why Are Investors Becoming Optimistic On These Stocks?

Although the markets opened in red on Friday, shares of Gramercy Property Trust Inc (NYSE:GPT), Rewalk Robotics Ltd (NASDAQ:RWLK), Seadrill Partners LLC (NYSE:SDLP) and Teekay Corporation (NYSE:TK) are gaining ground. In this article, let’s take a look at why investors are betting on these stocks. We are also going to assess the hedge fund sentiment towards these stocks.

We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular small-cap stock picks in real time since the end of August 2012. These stocks have returned 102% since then and outperformed the S&P 500 Index by around 53 percentage points (see more details here). That’s why we believe it is important to pay attention to the hedge fund sentiment; we also don’t like paying huge fees.

The first on the list is Gramercy Property Trust Inc (NYSE:GPT), whose shares are up by more than 4% today after Chambers Street Properties (NYSE:CSG) announced yesterday the approval by shareholders of the pending merger with Gramercy Property Trust. With more than 80% of the votes, the proposed merger is then concrete. Last but not least, Gramercy Property Trust Inc (NYSE:GPT) is in the green in morning trading after the analysts at DA Davidson initiated coverage with a ‘Buy’ recommendation and a price target of $8.75. Among the funds we track, Gramercy Property Trust Inc (NYSE:GPT) lost some popularity during the third quarter, with a total of 14 funds reporting long positions in the company, versus 20 funds a quarter earlier. However, these funds amassed 16.4% of the company’s outstanding stock heading into the fourth quarter.

Rewalk Robotics Ltd (NASDAQ:RWLK) continues to rise today following the announcement that the U.S. Department of Veterans Affairs (VA) will pay for the company’s exoskeleton systems to help veterans walk and improve their quality of life. According to our database of around 730 hedge funds, two funds reported long positions at the end of the third quarter, down from three funds at the end of the second quarter.

Despite analysts at Seaport Global Securities downgraded the company to ‘Neutral’ from ‘Buy’, Seadrill Partners LLC (NYSE:SDLP) is trading higher by more than 12%. However, the company has suffered a tremendous drop in the last 20 days. Overall, the company’s shares have fallen by 78% on a year-to-date basis. Hedge fund sentiment has stayed steady, as the number of funds long the stock remained unchanged at six at the end of the third quarter. Together they hold some 0.4% of the company’s common stock.

After a disastrous day in the stock market yesterday, with shares crumbling by over 60%, Teekay Corporation (NYSE:TK)‘s stock has slightly recovered and has gained almost 20% so far today. The company has recently cut its dividend by 90% to $0.22. In addition, the company has received multiple downgrades from analysts at Wells Fargo, Seaport Global Securities, Credit Suisse and RBC Capital. Hedge funds have been more pessimistic about the stock recently, with 19 funds long Teekay Corporation (NYSE:TK) at the end of the third quarter, down from 23 funds a quarter earlier. Alec Litowitz and Ross Laser‘s Magnetar Capital reported owning 6.53 million shares valued at $193.48 million as of the end of September.

Disclosure: none.