Hedge Fund Sentiment Is Stagnant On Gafisa SA (ADR) (GFA)

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Citadel Investment Group. 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 700+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Millennium Management).

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Gafisa SA (ADR) (NYSE:GFA) but similarly valued. These stocks are Sizmek Inc (NASDAQ:SZMK), Autobytel Inc. (NASDAQ:ABTL), Mattson Technology, Inc. (NASDAQ:MTSN), and FIRST FINANCIAL NORTHWEST, INC. (NASDAQ:FFNW). This group of stocks’ market caps are similar to GFA’s market cap.

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 $17 million. That figure was a meager $1 million in GFA’s case. Autobytel Inc. (NASDAQ:ABTL) is the most popular stock in this table. On the other hand FIRST FINANCIAL NORTHWEST, INC. (NASDAQ:FFNW) is the least popular one with only 6 bullish hedge fund positions on par with Gafisa SA (ADR) (NYSE:GFA). Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.