Is Glory Star New Media Group Holdings Limited (GSMG) A Good Stock To Buy?

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 821 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 March 31st, a week after the market trough. In this article we look at what those investors think of Glory Star New Media Group Holdings Limited (NASDAQ:GSMG).

Glory Star New Media Group Holdings Limited (NASDAQ:GSMG) shareholders have witnessed a decrease in hedge fund interest lately. Our calculations also showed that GSMG isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 58 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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Paul Glazer of Glazer Capital

Paul Glazer of Glazer Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a glance at the latest hedge fund action encompassing Glory Star New Media Group Holdings Limited (NASDAQ:GSMG).

How have hedgies been trading Glory Star New Media Group Holdings Limited (NASDAQ:GSMG)?

At Q1’s end, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from one quarter earlier. By comparison, 10 hedge funds held shares or bullish call options in GSMG a year ago. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

Among these funds, Millennium Management held the most valuable stake in Glory Star New Media Group Holdings Limited (NASDAQ:GSMG), which was worth $1.6 million at the end of the third quarter. On the second spot was Millennium Management which amassed $0.7 million worth of shares. BlueCrest Capital Mgmt., Owl Creek Asset Management, and Hudson Bay Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Ionic Capital Management allocated the biggest weight to Glory Star New Media Group Holdings Limited (NASDAQ:GSMG), around 0.04% of its 13F portfolio. BlueCrest Capital Mgmt. is also relatively very bullish on the stock, dishing out 0.03 percent of its 13F equity portfolio to GSMG.

Since Glory Star New Media Group Holdings Limited (NASDAQ:GSMG) has faced a decline in interest from hedge fund managers, we can see that there lies a certain “tier” of funds that elected to cut their full holdings in the first quarter. Intriguingly, Sander Gerber’s Hudson Bay Capital Management said goodbye to the biggest position of all the hedgies tracked by Insider Monkey, comprising close to $15.4 million in stock, and D. E. Shaw’s D E Shaw was right behind this move, as the fund dumped about $7.5 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 1 funds in the first quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Glory Star New Media Group Holdings Limited (NASDAQ:GSMG) but similarly valued. These stocks are Ciner Resources LP (NYSE:CINR), Antero Resources Corp (NYSE:AR), Howard Bancorp Inc (NASDAQ:HBMD), and Tarena International Inc (NASDAQ:TEDU). This group of stocks’ market valuations match GSMG’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CINR 1 1865 -1
AR 21 51307 -4
HBMD 6 10753 3
TEDU 2 3437 0
Average 7.5 16841 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.5 hedge funds with bullish positions and the average amount invested in these stocks was $17 million. That figure was $2 million in GSMG’s case. Antero Resources Corp (NYSE:AR) is the most popular stock in this table. On the other hand Ciner Resources LP (NYSE:CINR) is the least popular one with only 1 bullish hedge fund positions. Glory Star New Media Group Holdings Limited (NASDAQ:GSMG) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd but beat the market by 15.9 percentage points. Unfortunately GSMG wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on GSMG were disappointed as the stock returned -3.4% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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