Globalstar, Inc. (GSAT): Hedge Fund Sentiment Unchanged

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Globalstar, Inc. (NYSE:GSAT) and determine whether hedge funds had an edge regarding this stock.

Hedge fund interest in Globalstar, Inc. (NYSE:GSAT) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Criteo SA (NASDAQ:CRTO), Allegiance Bancshares, Inc. (NASDAQ:ABTX), and Ennis, Inc. (NYSE:EBF) to gather more data points. Our calculations also showed that GSAT 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.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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.

Michael Johnston - Steelhead Partners

Michael Johnston of Steelhead Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a peek at the recent hedge fund action surrounding Globalstar, Inc. (NYSE:GSAT).

What does smart money think about Globalstar, Inc. (NYSE:GSAT)?

At Q1’s end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. By comparison, 15 hedge funds held shares or bullish call options in GSAT a year ago. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

Among these funds, Mudrick Capital Management held the most valuable stake in Globalstar, Inc. (NYSE:GSAT), which was worth $32.1 million at the end of the third quarter. On the second spot was Steelhead Partners which amassed $9.4 million worth of shares. 683 Capital Partners, Legion Partners Asset Management, and Mason 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 Mudrick Capital Management allocated the biggest weight to Globalstar, Inc. (NYSE:GSAT), around 39.33% of its 13F portfolio. Caspian Capital Partners is also relatively very bullish on the stock, designating 5.29 percent of its 13F equity portfolio to GSAT.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Water Island Capital. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Centiva Capital).

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Globalstar, Inc. (NYSE:GSAT) but similarly valued. These stocks are Criteo SA (NASDAQ:CRTO), Allegiance Bancshares, Inc. (NASDAQ:ABTX), Ennis, Inc. (NYSE:EBF), and Athersys, Inc. (NASDAQ:ATHX). This group of stocks’ market caps match GSAT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CRTO 13 64427 3
ABTX 6 6471 -1
EBF 9 62731 -2
ATHX 8 3683 1
Average 9 34328 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $34 million. That figure was $56 million in GSAT’s case. Criteo SA (NASDAQ:CRTO) is the most popular stock in this table. On the other hand Allegiance Bancshares, Inc. (NASDAQ:ABTX) is the least popular one with only 6 bullish hedge fund positions. Globalstar, Inc. (NYSE:GSAT) 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 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately GSAT wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on GSAT were disappointed as the stock returned 13.8% 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.