It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 7.6% over the 12-month period ending November 21, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored mid-cap stocks by the best performing hedge funds monitored by Insider Monkey generated a return of 18% over the same time span. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Golub Capital BDC Inc (NASDAQ:GBDC).
Is Golub Capital BDC Inc (NASDAQ:GBDC) a good stock to buy now? Hedge funds are definitely actually taking a pessimistic view. The number of long hedge fund positions retreated by 1 in recent months. There were 7 hedge funds in our database with GBDC holdings at the end of the third quarter. At the end of this article we will also compare GBDC to other stocks including Boise Cascade Co (NYSE:BCC), Grupo Supervielle SA -ADR (NYSE:SUPV), and Marcus & Millichap Inc (NYSE:MMI) 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, we’re going to go over the new action regarding Golub Capital BDC Inc (NASDAQ:GBDC).
What does the smart money think about Golub Capital BDC Inc (NASDAQ:GBDC)?
Heading into the fourth quarter of 2016, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a drop of 13% from one quarter earlier. By comparison, 6 hedge funds held shares or bullish call options in GBDC heading into this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Amy Minella’s Cardinal Capital has the most valuable position in Golub Capital BDC Inc (NASDAQ:GBDC), worth close to $14.7 million. The second most bullish fund manager is Charles Clough of Clough Capital Partners, with a $13.6 million position. Some other peers with similar optimism include Robert B. Gillam’s McKinley Capital Management, Millennium Management, one of the 10 largest hedge funds in the world, and Mark Coe’s Coe Capital Management. We should note that none of these hedge funds are 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.
Due to the fact that Golub Capital BDC Inc (NASDAQ:GBDC) has encountered falling interest from the smart money, it’s safe to say that there exists a select few hedge funds that decided to sell off their full holdings by the end of the third quarter. It’s worth mentioning that First Eagle Investment Management cut the biggest investment of all the investors followed by Insider Monkey, totaling close to $6.2 million in stock, and Matthew Hulsizer’s PEAK6 Capital Management was right behind this move, as the fund dumped about $0.5 million worth of GBDC shares.
Let’s go over hedge fund activity in other stocks similar to Golub Capital BDC Inc (NASDAQ:GBDC). These stocks are Boise Cascade Co (NYSE:BCC), Grupo Supervielle SA -ADR (NYSE:SUPV), Marcus & Millichap Inc (NYSE:MMI), and Surgery Partners Inc (NASDAQ:SGRY). All of these stocks’ market caps match GBDC’s market cap.
|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 11 hedge funds with bullish positions and the average amount invested in these stocks was $90 million. That figure was $32 million in GBDC’s case. Boise Cascade Co (NYSE:BCC) is the most popular stock in this table. On the other hand Surgery Partners Inc (NASDAQ:SGRY) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Golub Capital BDC Inc (NASDAQ:GBDC) is even less popular than SGRY. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.