You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund investors like Carl Icahn and George Soros hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.
In this article, we are going to take a closer look at Gulf Island Fabrication, Inc. (NASDAQ:GIFI), which registered a decline in popularity among smart money investors in our database last quarter. At the end of September, seven funds held shares of the company. At the end of this article we will also compare GIFI to other stocks including Hutchinson Technology Incorporated (NASDAQ:HTCH), Kura Oncology Inc (NASDAQ:KURA), and American Farmland Co (NYSEMKT:AFCO) to get a better sense of its popularity.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
Now, let’s take a look at the latest action surrounding Gulf Island Fabrication, Inc. (NASDAQ:GIFI).
How have hedgies been trading Gulf Island Fabrication, Inc. (NASDAQ:GIFI)?
At Q3’s end, a total of seven funds tracked by Insider Monkey held long positions in this stock, down by 13% from the second quarter of 2016. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, John W. Rogers’ Ariel Investments holds the biggest position in Gulf Island Fabrication, Inc. (NASDAQ:GIFI). Ariel Investments has a $7.2 million position in the stock. Coming in second is Chuck Royce’s Royce & Associates, with a $5.7 million position. Remaining peers that hold long positions contain Renaissance Technologies, one of the largest hedge funds in the world, Tim Curro’s Value Holdings LP, and D. E. Shaw’s D E Shaw. We should note that Value Holdings LP is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Millennium Management. 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 none of the 700+ hedge funds tracked by Insider Monkey identified GIFI as a viable investment and initiated a position in the stock.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Gulf Island Fabrication, Inc. (NASDAQ:GIFI) but similarly valued. We will take a look at Hutchinson Technology Incorporated (NASDAQ:HTCH), Kura Oncology Inc (NASDAQ:KURA), American Farmland Co (NYSEMKT:AFCO), and BG Staffing Inc (NYSEMKT:BGSF). This group of stocks’ market values match GIFI’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of five funds with bullish positions and the average amount invested in these stocks was $13 million. That figure was $18 million in GIFI’s case. Hutchinson Technology Incorporated (NASDAQ:HTCH) is the most popular stock in this table. On the other hand BG Staffing Inc (NYSEMKT:BGSF) is the least popular one with only four bullish hedge fund positions. Compared to these stocks Gulf Island Fabrication, Inc. (NASDAQ:GIFI) 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.