Is Geospace Technologies Corp (GEOS) A Good Stock To Buy?

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Geospace Technologies Corp (NASDAQ:GEOS).

Geospace Technologies Corp (NASDAQ:GEOS) was in 12 hedge funds’ portfolios at the end of September. GEOS shareholders have witnessed an increase in hedge fund interest lately. There were 10 hedge funds in our database with GEOS holdings at the end of the previous quarter. Our calculations also showed that GEOS isn’t among the 30 most popular stocks among hedge funds.

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 market by 18 percentage points since May 2014 through December 3, 2018 (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.

D. E. Shaw

We’re going to take a look at the new hedge fund action regarding Geospace Technologies Corp (NASDAQ:GEOS).

Hedge fund activity in Geospace Technologies Corp (NASDAQ:GEOS)

At Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from one quarter earlier. On the other hand, there were a total of 2 hedge funds with a bullish position in GEOS at the beginning of this year. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds With GEOS Positions

More specifically, Rutabaga Capital Management was the largest shareholder of Geospace Technologies Corp (NASDAQ:GEOS), with a stake worth $6.4 million reported as of the end of September. Trailing Rutabaga Capital Management was Millennium Management, which amassed a stake valued at $1.8 million. D E Shaw, Renaissance Technologies, and Ancora Advisors were also very fond of the stock, giving the stock large weights in their portfolios.

Now, specific money managers were breaking ground themselves. Highland Capital Management, managed by James Dondero, assembled the most valuable position in Geospace Technologies Corp (NASDAQ:GEOS). Highland Capital Management had $0.3 million invested in the company at the end of the quarter. Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital also initiated a $0 million position during the quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Geospace Technologies Corp (NASDAQ:GEOS). We will take a look at Community Financial Corp (NASDAQ:TCFC), United Security Bancshares (NASDAQ:UBFO), Esquire Financial Holdings, Inc. (NASDAQ:ESQ), and Kopin Corporation (NASDAQ:KOPN). This group of stocks’ market caps resemble GEOS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TCFC 5 20687 0
UBFO 2 10540 -1
ESQ 3 5285 0
KOPN 2 5223 -2
Average 3 10434 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 3 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $11 million in GEOS’s case. Community Financial Corp (NASDAQ:TCFC) is the most popular stock in this table. On the other hand United Security Bancshares (NASDAQ:UBFO) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Geospace Technologies Corp (NASDAQ:GEOS) 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.

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