Hedge Funds Are Dumping Gran Tierra Energy Inc. (GTE)

Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.

Gran Tierra Energy Inc. (NYSEAMEX:GTE) was in 16 hedge funds’ portfolios at the end of September. GTE shareholders have witnessed a decrease in enthusiasm from smart money recently. There were 17 hedge funds in our database with GTE positions at the end of the previous quarter. At the end of this article we will also compare GTE to other stocks including Capital Senior Living Corporation (NYSE:CSU), ePlus Inc. (NASDAQ:PLUS), and 1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS) to get a better sense of its popularity.

In the 21st century investor’s toolkit there are a large number of signals stock traders have at their disposal to assess their holdings. A duo of the most useful signals are hedge fund and insider trading indicators. We have shown that, historically, those who follow the best picks of the elite fund managers can trounce the S&P 500 by a healthy margin (see the details here).

Keeping this in mind, let’s take a gander at the latest action surrounding Gran Tierra Energy Inc. (NYSEAMEX:GTE).

Hedge fund activity in Gran Tierra Energy Inc. (NYSEAMEX:GTE)

At the end of the third quarter, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the previous quarter. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, West Face Capital, managed by Greg Boland, holds the biggest position in Gran Tierra Energy Inc. (NYSEAMEX:GTE). West Face Capital has a $50.7 million position in the stock, comprising 21% of its 13F portfolio. The second most bullish fund manager is Joseph Oughourlian and Michel Brogard of Amber Capital, with a $37.7 million position; 47.9% of its 13F portfolio is allocated to the stock. Remaining members of the smart money with similar optimism contain Jim Simons’ Renaissance Technologies, John Thiessen’s Vertex One Asset Management and Andy Redleaf’s Whitebox Advisors.

Because Gran Tierra Energy Inc. (NYSEAMEX:GTE) has experienced a decline in interest from hedge fund managers, it’s easy to see that there lies a certain “tier” of money managers that elected to cut their entire stakes last quarter. Interestingly, Noam Gottesman’s GLG Partners cut the largest position of the 700 funds tracked by Insider Monkey, valued at an estimated $0.9 million in stock, and Peter Muller’s PDT Partners was right behind this move, as the fund dropped about $0.2 million worth of shares.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Gran Tierra Energy Inc. (NYSEAMEX:GTE) but similarly valued. These stocks are Capital Senior Living Corporation (NYSE:CSU), ePlus Inc. (NASDAQ:PLUS), 1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS), and Avianca Holdings SA (ADR) (NYSE:AVH). All of these stocks’ market caps are closest to GTE’s market cap.

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 $53 million. That figure was $120 million in GTE’s case. Capital Senior Living Corporation (NYSE:CSU) is the most popular stock in this table. On the other hand Avianca Holdings SA (ADR) (NYSE:AVH) is the least popular one with only four bullish hedge fund positions. Gran Tierra Energy Inc. (NYSEAMEX:GTE) 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 CSU might be a better candidate to consider a long position.