Hedge Funds Have Never Been Less Bullish On Ferroglobe PLC (GSM)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 752 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. In this article we look at what those investors think of Ferroglobe PLC (NASDAQ:GSM).

Ferroglobe PLC (NASDAQ:GSM) was in 9 hedge funds’ portfolios at the end of the third quarter of 2019. GSM investors should pay attention to a decrease in hedge fund sentiment lately. There were 11 hedge funds in our database with GSM holdings at the end of the previous quarter. Our calculations also showed that GSM 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.

In the eyes of most shareholders, hedge funds are perceived as slow, outdated financial vehicles of the past. While there are more than 8000 funds trading at present, Our experts look at the bigwigs of this group, around 750 funds. These hedge fund managers command most of the smart money’s total asset base, and by tracking their first-class stock picks, Insider Monkey has brought to light a few investment strategies that have historically outpaced the market. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points a year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

Chuck Royce

Chuck Royce of Royce & Associates

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy  based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. Let’s take a glance at the new hedge fund action surrounding Globe Specialty Metals, Inc. (NASDAQ:GSM).

Hedge fund activity in Ferroglobe PLC (NASDAQ:GSM)

At the end of the third quarter, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of -18% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards GSM over the last 17 quarters. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Adage Capital Management, managed by Phill Gross and Robert Atchinson, holds the largest position in Ferroglobe PLC (NASDAQ:GSM). Adage Capital Management has a $16.1 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is Royce & Associates, managed by Chuck Royce, which holds a $2.5 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other peers that hold long positions comprise Renaissance Technologies, David E. Shaw’s D E Shaw and Phil Frohlich’s Prescott Group Capital Management. In terms of the portfolio weights assigned to each position Prescott Group Capital Management allocated the biggest weight to Ferroglobe PLC (NASDAQ:GSM), around 0.26% of its 13F portfolio. Adage Capital Management is also relatively very bullish on the stock, setting aside 0.04 percent of its 13F equity portfolio to GSM.

Since Ferroglobe PLC (NASDAQ:GSM) has faced a decline in interest from the aggregate hedge fund industry, we can see that there exists a select few fund managers that decided to sell off their entire stakes by the end of the third quarter. Intriguingly, Philip Hempleman’s Ardsley Partners sold off the largest stake of the 750 funds tracked by Insider Monkey, totaling an estimated $0.3 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund dumped about $0.1 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 2 funds by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks similar to Ferroglobe PLC (NASDAQ:GSM). We will take a look at Cue Biopharma, Inc. (NASDAQ:CUE), Roan Resources, Inc. (NYSE:ROAN), First Northwest Bancorp (NASDAQ:FNWB), and Nine Energy Service, Inc. (NYSE:NINE). All of these stocks’ market caps are similar to GSM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CUE 5 21860 4
ROAN 13 58682 -1
FNWB 3 20926 1
NINE 7 17303 1
Average 7 29693 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $24 million in GSM’s case. Roan Resources, Inc. (NYSE:ROAN) is the most popular stock in this table. On the other hand First Northwest Bancorp (NASDAQ:FNWB) is the least popular one with only 3 bullish hedge fund positions. Ferroglobe PLC (NASDAQ:GSM) 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 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 GSM wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on GSM were disappointed as the stock returned -43.4% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.

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