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Did Hedge Funds Make The Right Call On Great Lakes Dredge & Dock Corporation (GLDD) ?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD) based on that data and determine whether they were really smart about the stock.

Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD) investors should pay attention to a decrease in enthusiasm from smart money lately. Our calculations also showed that GLDD isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 58 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Izzy Englander of MILLENNIUM MANAGEMENT

Israel Englander of Millennium Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now we’re going to analyze the new hedge fund action surrounding Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD).

How have hedgies been trading Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD)?

At the end of the first quarter, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from the previous quarter. On the other hand, there were a total of 18 hedge funds with a bullish position in GLDD a year ago. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

Is GLDD A Good Stock To Buy?

More specifically, Renaissance Technologies was the largest shareholder of Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD), with a stake worth $20.9 million reported as of the end of September. Trailing Renaissance Technologies was Encompass Capital Advisors, which amassed a stake valued at $11.9 million. D E Shaw, Minerva Advisors, and AQR Capital 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 Minerva Advisors allocated the biggest weight to Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD), around 6.8% of its 13F portfolio. Harvey Partners is also relatively very bullish on the stock, dishing out 6.68 percent of its 13F equity portfolio to GLDD.

Judging by the fact that Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD) has witnessed a decline in interest from the smart money, we can see that there was a specific group of funds that elected to cut their entire stakes heading into Q4. Interestingly, Israel Englander’s Millennium Management said goodbye to the biggest stake of the 750 funds tracked by Insider Monkey, comprising close to $3.6 million in stock, and Matt Diserio and Disque Deane Jr.’s Water Asset Management was right behind this move, as the fund cut about $1.6 million worth. These moves are interesting, as total hedge fund interest dropped by 5 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks similar to Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD). These stocks are Universal Electronics Inc (NASDAQ:UEIC), Sleep Number Corporation (NASDAQ:SNBR), NV5 Global Inc (NASDAQ:NVEE), and ConnectOne Bancorp Inc (NASDAQ:CNOB). This group of stocks’ market values are similar to GLDD’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
UEIC 13 21742 1
SNBR 20 64714 0
NVEE 9 11304 0
CNOB 11 32159 0
Average 13.25 32480 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $32 million. That figure was $78 million in GLDD’s case. Sleep Number Corporation (NASDAQ:SNBR) is the most popular stock in this table. On the other hand NV5 Global Inc (NASDAQ:NVEE) is the least popular one with only 9 bullish hedge fund positions. Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD) 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th but beat the market by 17.1 percentage points. Unfortunately GLDD wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on GLDD were disappointed as the stock returned 2.4% 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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Disclosure: None. This article was originally published at Insider Monkey.