Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards P.H. Glatfelter Company (NYSE:GLT).
Is P.H. Glatfelter Company (NYSE:GLT) a buy right now? The smart money is buying. The number of bullish hedge fund bets inched up by 3 in recent months. Our calculations also showed that GLT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). GLT was in 9 hedge funds’ portfolios at the end of the third quarter of 2019. There were 6 hedge funds in our database with GLT positions at the end of the previous quarter.
Video: Click the image to 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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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. We’re going to view the new hedge fund action regarding P.H. Glatfelter Company (NYSE:GLT).
What does smart money think about P.H. Glatfelter Company (NYSE:GLT)?
Heading into the fourth quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GLT over the last 17 quarters. 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 P.H. Glatfelter Company (NYSE:GLT) was held by Carlson Capital, which reported holding $7.1 million worth of stock at the end of September. It was followed by Royce & Associates with a $5.4 million position. Other investors bullish on the company included Two Sigma Advisors, Citadel Investment Group, and Paloma Partners. In terms of the portfolio weights assigned to each position Carlson Capital allocated the biggest weight to P.H. Glatfelter Company (NYSE:GLT), around 0.13% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, setting aside 0.05 percent of its 13F equity portfolio to GLT.
Consequently, key hedge funds were breaking ground themselves. Paloma Partners, managed by Donald Sussman, initiated the most valuable position in P.H. Glatfelter Company (NYSE:GLT). Paloma Partners had $0.4 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $0.3 million position during the quarter. The only other fund with a new position in the stock is Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s go over hedge fund activity in other stocks similar to P.H. Glatfelter Company (NYSE:GLT). These stocks are New Gold Inc. (NYSE:NGD), Nabors Industries Ltd. (NYSE:NBR), Golar LNG Partners LP (NASDAQ:GMLP), and Allegiance Bancshares, Inc. (NASDAQ:ABTX). This group of stocks’ market values are similar to GLT’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $57 million. That figure was $16 million in GLT’s case. Nabors Industries Ltd. (NYSE:NBR) is the most popular stock in this table. On the other hand Golar LNG Partners LP (NASDAQ:GMLP) is the least popular one with only 4 bullish hedge fund positions. P.H. Glatfelter Company (NYSE:GLT) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on GLT as the stock returned 17% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.