There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other elite funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Gladstone Investment Corporation (NASDAQ:GAIN).
Is Gladstone Investment Corporation (NASDAQ:GAIN) a splendid investment now? The best stock pickers are in an optimistic mood. The number of long hedge fund bets rose by 1 in recent months. At the end of this article we will also compare GAIN to other stocks, including Second Sight Medical Products Inc (NASDAQ:EYES), SeaChange International (NASDAQ:SEAC), and FreightCar America, Inc. (NASDAQ:RAIL) to get a better sense of its popularity.
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In today’s marketplace there are several formulas investors employ to evaluate their stock investments. A duo of the most innovative formulas are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the top picks of the top fund managers can outpace the market by a solid margin (see the details here).
Keeping this in mind, we’re going to view the new action encompassing Gladstone Investment Corporation (NASDAQ:GAIN).
What have hedge funds been doing with Gladstone Investment Corporation (NASDAQ:GAIN)?
At the end of the third quarter, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 17% from the second quarter. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Two Sigma Advisors, managed by John Overdeck and David Siegel, holds the most valuable position in Gladstone Investment Corporation (NASDAQ:GAIN). Two Sigma Advisors has an $1.4 million position in the stock, comprising less than 0.1% of its 13F portfolio. On Two Sigma Advisors’s heels is Israel Englander’s Millennium Management, with an $0.4 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions include Joseph A. Jolson’s Harvest Capital Strategies, D. E. Shaw’s D E Shaw and Chao Ku’s Nine Chapters Capital Management.
As industrywide interest jumped, specific money managers were breaking ground themselves. Harvest Capital Strategies, managed by Joseph A. Jolson, assembled the biggest position in Gladstone Investment Corporation (NASDAQ:GAIN). Harvest Capital Strategies had $0.3 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also made an $0 million investment in the stock during the quarter.
Let’s now review hedge fund activity in other stocks similar to Gladstone Investment Corporation (NASDAQ:GAIN). We will take a look at Second Sight Medical Products Inc (NASDAQ:EYES), SeaChange International (NASDAQ:SEAC), FreightCar America, Inc. (NASDAQ:RAIL), and Avalanche Biotechnologies Inc (NASDAQ:AAVL). This group of stocks’ market caps are closest to GAIN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EYES | 4 | 839 | 1 |
| SEAC | 11 | 49606 | -3 |
| RAIL | 14 | 13360 | 3 |
| AAVL | 19 | 54524 | -3 |
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was just $3 million in GAIN’s case. Avalanche Biotechnologies Inc (NASDAQ:AAVL) is the most popular stock in this table. On the other hand Second Sight Medical Products Inc (NASDAQ:EYES) is the least popular one with only 4 bullish hedge fund positions. Gladstone Investment Corporation (NASDAQ:GAIN) 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. In this regard AAVL might be a better candidate to consider a long position.
