In this article we are going to use hedge fund sentiment as a tool and determine whether Global Medical REIT Inc. (NYSE:GMRE) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Global Medical REIT Inc. (NYSE:GMRE) was in 6 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 16. GMRE has experienced a decrease in support from the world’s most elite money managers recently. There were 7 hedge funds in our database with GMRE holdings at the end of June. Our calculations also showed that GMRE isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
John Overdeck of Two Sigma Advisors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind let’s go over the recent hedge fund action regarding Global Medical REIT Inc. (NYSE:GMRE).
What does smart money think about Global Medical REIT Inc. (NYSE:GMRE)?
At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from one quarter earlier. On the other hand, there were a total of 8 hedge funds with a bullish position in GMRE a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
The largest stake in Global Medical REIT Inc. (NYSE:GMRE) was held by Arrowstreet Capital, which reported holding $4.8 million worth of stock at the end of September. It was followed by Two Sigma Advisors with a $4.2 million position. Other investors bullish on the company included Renaissance Technologies, Millennium Management, and AQR Capital Management. In terms of the portfolio weights assigned to each position Two Sigma Advisors allocated the biggest weight to Global Medical REIT Inc. (NYSE:GMRE), around 0.01% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to GMRE.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Quantinno Capital. 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 750+ hedge funds tracked by Insider Monkey identified GMRE as a viable investment and initiated a position in the stock.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Global Medical REIT Inc. (NYSE:GMRE) but similarly valued. We will take a look at Hyster-Yale Materials Handling Inc (NYSE:HY), Sportsman’s Warehouse Holdings Inc (NASDAQ:SPWH), MYR Group Inc (NASDAQ:MYRG), Omeros Corporation (NASDAQ:OMER), Forrester Research, Inc. (NASDAQ:FORR), Five Point Holdings, LLC (NYSE:FPH), and Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD). This group of stocks’ market caps resemble GMRE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HY | 12 | 31979 | 1 |
| SPWH | 26 | 118344 | -7 |
| MYRG | 10 | 33582 | 2 |
| OMER | 15 | 96335 | 8 |
| FORR | 8 | 73281 | 1 |
| FPH | 13 | 143746 | -1 |
| GLDD | 20 | 96450 | 3 |
| Average | 14.9 | 84817 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.9 hedge funds with bullish positions and the average amount invested in these stocks was $85 million. That figure was $14 million in GMRE’s case. Sportsman’s Warehouse Holdings Inc (NASDAQ:SPWH) is the most popular stock in this table. On the other hand Forrester Research, Inc. (NASDAQ:FORR) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Global Medical REIT Inc. (NYSE:GMRE) is even less popular than FORR. Our overall hedge fund sentiment score for GMRE is 15.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Hedge funds dodged a bullet by taking a bearish stance towards GMRE. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th but managed to beat the market again by 16.1 percentage points. Unfortunately GMRE wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); GMRE investors were disappointed as the stock returned 1% since the end of the third quarter (through 11/27) 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 most of these stocks already outperformed the market so far in 2020.
Follow Global Medical Reit Inc. (NYSE:GMRE)
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Disclosure: None. This article was originally published at Insider Monkey.
