Hedge Funds Are Dumping Greenlight Capital Re, Ltd. (GLRE)

In this article you are going to find out whether hedge funds think Greenlight Capital Re, Ltd. (NASDAQ:GLRE) is a good investment 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.

Greenlight Capital Re, Ltd. (NASDAQ:GLRE) investors should pay attention to a decrease in support from the world’s most elite money managers lately. Our calculations also showed that GLRE 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.

In the 21st century investor’s toolkit there are a lot of signals market participants put to use to evaluate publicly traded companies. Some of the less utilized signals are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the best picks of the top money managers can trounce their index-focused peers by a significant amount (see the details here).

John Levin of Levin Capital

John A. Levin of Levin Capital Strategies

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a peek at the key hedge fund action regarding Greenlight Capital Re, Ltd. (NASDAQ:GLRE).

Hedge fund activity in Greenlight Capital Re, Ltd. (NASDAQ:GLRE)

Heading into the second quarter of 2020, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of -50% from one quarter earlier. By comparison, 3 hedge funds held shares or bullish call options in GLRE a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Greenlight Capital Re, Ltd. (NASDAQ:GLRE) was held by Mangrove Partners, which reported holding $4.6 million worth of stock at the end of September. It was followed by Factorial Partners with a $0.3 million position. Other investors bullish on the company included Renaissance Technologies, Levin Capital Strategies, and Horizon Asset Management. In terms of the portfolio weights assigned to each position Mangrove Partners allocated the biggest weight to Greenlight Capital Re, Ltd. (NASDAQ:GLRE), around 0.64% of its 13F portfolio. Factorial Partners is also relatively very bullish on the stock, designating 0.39 percent of its 13F equity portfolio to GLRE.

Since Greenlight Capital Re, Ltd. (NASDAQ:GLRE) has witnessed declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there were a few funds who sold off their full holdings heading into Q4. It’s worth mentioning that Paul Marshall and Ian Wace’s Marshall Wace LLP sold off the biggest position of all the hedgies watched by Insider Monkey, comprising close to $1.3 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also sold off its stock, about $0.5 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 7 funds heading into Q4.

Let’s check out hedge fund activity in other stocks similar to Greenlight Capital Re, Ltd. (NASDAQ:GLRE). We will take a look at Southern First Bancshares, Inc. (NASDAQ:SFST), Northwest Pipe Company (NASDAQ:NWPX), Aduro BioTech Inc (NASDAQ:ADRO), and American Renal Associates Holdings, Inc (NYSE:ARA). This group of stocks’ market valuations are closest to GLRE’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SFST 5 18335 -2
NWPX 13 34829 0
ADRO 11 41439 2
ARA 6 124445 0
Average 8.75 54762 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $55 million. That figure was $6 million in GLRE’s case. Northwest Pipe Company (NASDAQ:NWPX) is the most popular stock in this table. On the other hand Southern First Bancshares, Inc. (NASDAQ:SFST) is the least popular one with only 5 bullish hedge fund positions. Greenlight Capital Re, Ltd. (NASDAQ:GLRE) 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 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 13.9% in 2020 through June 10th and surpassed the market by 14.2 percentage points. Unfortunately GLRE wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); GLRE investors were disappointed as the stock returned 16% during the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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