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Gain Capital Holdings Inc (GCAP): Hedge Fund Sentiment Unchanged

“Market conditions are changing. The continued rise in interest rates suggests we are in the early stages of a bond bear market, which could intensify as central banks withdraw liquidity. The receding tide of liquidity will start to reveal more rocks beyond what has been exposed in emerging markets so far, and the value of a value discipline will be in avoiding the biggest capital-destroying rocks. If a rock emerges on the crowded shore of U.S. momentum, it could result in a major liquidity challenge, as momentum is often most intense on the downside as a crowded trade reverses. So investors are facing a large potential trade-off right now: continue to bet on the current dominance of momentum and the S&P 500, or bet on change and take an active value bet in names with attractive value and optionality, but with negative momentum,” said Clearbridge Investments in its market commentary. We aren’t sure whether long-term interest rates will top 5% and value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Gain Capital Holdings Inc (NYSE:GCAP).

Gain Capital Holdings Inc (NYSE:GCAP) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 11 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 PDF Solutions, Inc. (NASDAQ:PDFS), Southern First Bancshares, Inc. (NASDAQ:SFST), and Celcuity Inc. (NASDAQ:CELC) to gather more data points.

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 market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ken Griffin CITADEL INVESTMENT GROUP

We’re going to take a glance at the key hedge fund action regarding Gain Capital Holdings Inc (NYSE:GCAP).

How are hedge funds trading Gain Capital Holdings Inc (NYSE:GCAP)?

At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, no change from the previous quarter. On the other hand, there were a total of 13 hedge funds with a bullish position in GCAP at the beginning of this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

GCAP_dec2018

The largest stake in Gain Capital Holdings Inc (NYSE:GCAP) was held by Rima Senvest Management, which reported holding $21.1 million worth of stock at the end of September. It was followed by GLG Partners with a $4.3 million position. Other investors bullish on the company included Millennium Management, Two Sigma Advisors, and Citadel Investment Group.

Judging by the fact that Gain Capital Holdings Inc (NYSE:GCAP) has faced a decline in interest from the smart money, it’s easy to see that there was a specific group of hedgies who sold off their positions entirely in the third quarter. Interestingly, Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners said goodbye to the biggest position of all the hedgies monitored by Insider Monkey, comprising about $0.1 million in stock. D. E. Shaw’s fund, D E Shaw, also dropped its stock, about $0.1 million worth. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out hedge fund activity in other stocks similar to Gain Capital Holdings Inc (NYSE:GCAP). These stocks are PDF Solutions, Inc. (NASDAQ:PDFS), Southern First Bancshares, Inc. (NASDAQ:SFST), Celcuity Inc. (NASDAQ:CELC), and Energy Fuels Inc. (NYSEMKT:UUUU). This group of stocks’ market caps are closest to GCAP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PDFS 10 17524 1
SFST 7 37838 0
CELC 1 336 -1
UUUU 6 4386 2
Average 6 15021 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $15 million. That figure was $29 million in GCAP’s case. PDF Solutions, Inc. (NASDAQ:PDFS) is the most popular stock in this table. On the other hand Celcuity Inc. (NASDAQ:CELC) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Gain Capital Holdings Inc (NYSE:GCAP) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

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

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