Do Hedge Funds Love Globalstar, Inc. (GSAT)?

Is Globalstar, Inc. (NYSE:GSAT) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Globalstar, Inc. (NYSE:GSAT) has experienced a decrease in hedge fund interest of late. Our calculations also showed that GSAT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Michael Johnston - Steelhead Partners

Michael Johnston of Steelhead Partners

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a gander at the fresh hedge fund action surrounding Globalstar, Inc. (NYSE:GSAT).

Hedge fund activity in Globalstar, Inc. (NYSE:GSAT)

At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -15% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards GSAT over the last 17 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Globalstar, Inc. (NYSE:GSAT) was held by Mudrick Capital Management, which reported holding $47.8 million worth of stock at the end of September. It was followed by Warlander Asset Management with a $17.8 million position. Other investors bullish on the company included Steelhead Partners, 683 Capital Partners, and Mason Capital Management. In terms of the portfolio weights assigned to each position Mudrick Capital Management allocated the biggest weight to Globalstar, Inc. (NYSE:GSAT), around 86.94% of its 13F portfolio. Warlander Asset Management is also relatively very bullish on the stock, designating 15.97 percent of its 13F equity portfolio to GSAT.

Due to the fact that Globalstar, Inc. (NYSE:GSAT) has faced declining sentiment from the smart money, it’s safe to say that there was a specific group of hedge funds who were dropping their full holdings last quarter. It’s worth mentioning that Israel Englander’s Millennium Management cut the largest investment of the “upper crust” of funds watched by Insider Monkey, comprising close to $0.6 million in stock. Donald Sussman’s fund, Paloma Partners, also said goodbye to its stock, about $0 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 2 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Globalstar, Inc. (NYSE:GSAT) but similarly valued. These stocks are Quanex Building Products Corporation (NYSE:NX), Genesco Inc. (NYSE:GCO), QCR Holdings, Inc. (NASDAQ:QCRH), and Inc. (NYSE:CARS). This group of stocks’ market valuations are closest to GSAT’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NX 17 60705 4
GCO 18 60081 1
QCRH 9 64083 1
CARS 31 171735 2
Average 18.75 89151 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $89 million. That figure was $97 million in GSAT’s case. Inc. (NYSE:CARS) is the most popular stock in this table. On the other hand QCR Holdings, Inc. (NASDAQ:QCRH) is the least popular one with only 9 bullish hedge fund positions. Globalstar, Inc. (NYSE:GSAT) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately GSAT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); GSAT investors were disappointed as the stock returned -4.9% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.

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