What Smart Money Thinks of GTT Communications Inc (GTT)?

The worries about the election and the ongoing uncertainty about the path of interest-rate increases have been keeping investors on the sidelines. Of course, most hedge funds and other asset managers have been underperforming main stock market indices since the middle of 2015. Interestingly though, smaller-cap stocks registered their best performance relative to the large-capitalization stocks since the end of the June quarter, suggesting that this may be the best time to take a cue from their stock picks. In fact, the Russell 2000 Index gained more than 15% since the beginning of the third quarter, while the Standard and Poor’s 500 benchmark returned less than 6%. This article will lay out and discuss the hedge fund and institutional investor sentiment towards GTT Communications Inc (NYSE:GTT) .

GTT Communications Inc (NYSE:GTT) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 15 hedge funds’ portfolios at the end of September. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Kindred Healthcare, Inc. (NYSE:KND), Pengrowth Energy Corp (USA) (NYSE:PGH), and Invesco Dynamic Credit Opportunities Fd (NYSE:VTA) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

Now, let’s view the key action surrounding GTT Communications Inc (NYSE:GTT).

What have hedge funds been doing with GTT Communications Inc (NYSE:GTT)?

Heading into the fourth quarter of 2016, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, unchanged from the last quarter. By comparison, 17 hedge funds held shares or bullish call options in GTT heading into this year. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Matthew A. Weatherbie’s Weatherbie Capital has the largest position in GTT Communications Inc (NYSE:GTT), worth close to $34.8 million, corresponding to 4.4% of its total 13F portfolio. On Weatherbie Capital’s heels is Julian Allen of Spitfire Capital, with a $30.6 million position; the fund has 13.6% of its 13F portfolio invested in the stock. Some other professional money managers with similar optimism consist of Remy Trafelet’s Trafelet Capital, Brian C. Freckmann’s Lyon Street Capital, and Richard Driehaus’ Driehaus Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Since GTT Communications Inc (NYSE:GTT) has faced a decline in interest from the smart money, it’s safe to say that there was a specific group of hedgies that elected to cut their entire stakes during the third quarter. It’s worth mentioning that Jim Simons’ Renaissance Technologies cut the largest investment of all the hedgies monitored by Insider Monkey, valued at close to $1 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund said goodbye to about $0.5 million worth of shares.

Let’s go over hedge fund activity in other stocks similar to GTT Communications Inc (NYSE:GTT). These stocks are Kindred Healthcare, Inc. (NYSE:KND), Pengrowth Energy Corp (USA) (NYSE:PGH), Invesco Dynamic Credit Opportunities Fd (NYSE:VTA), and Urstadt Biddle Properties Inc (NYSE:UBA). This group of stocks’ market valuations are similar to GTT’s market valuation.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $50 million. That figure was $153 million in GTT’s case. Kindred Healthcare, Inc. (NYSE:KND) is the most popular stock in this table. On the other hand, Invesco Dynamic Credit Opportunities Fd (NYSE:VTA) is the least popular one with only four bullish hedge fund positions. GTT Communications Inc (NYSE:GTT) 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. In this regard, Kindred Healthcare, Inc. (NYSE:KND) might be a better candidate to consider taking a long position in.

Disclosure: none