At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Goodrich Petroleum Corporation (NYSE:GDP) makes for a good investment right now.
Is Goodrich Petroleum (GDP) a good stock to buy now? GDP has experienced a decrease in enthusiasm from smart money of late. Goodrich Petroleum Corporation (NYSE:GDP) was in 5 hedge funds’ portfolios at the end of September. The all time high for this statistics is 7. There were 6 hedge funds in our database with GDP holdings at the end of June. Our calculations also showed that GDP 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.
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 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 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.
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. Now we’re going to take a gander at the fresh hedge fund action regarding Goodrich Petroleum Corporation (NYSE:GDP).
How are hedge funds trading Goodrich Petroleum Corporation (NYSE:GDP)?
At the end of the third quarter, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from the second quarter of 2020. On the other hand, there were a total of 7 hedge funds with a bullish position in GDP a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
The largest stake in Goodrich Petroleum Corporation (NYSE:GDP) was held by Anchorage Advisors, which reported holding $12.1 million worth of stock at the end of September. It was followed by Deep Basin Capital with a $4.7 million position. Other investors bullish on the company included Adage Capital Management, Renaissance Technologies, and GRT Capital Partners. In terms of the portfolio weights assigned to each position Anchorage Advisors allocated the biggest weight to Goodrich Petroleum Corporation (NYSE:GDP), around 0.94% of its 13F portfolio. Deep Basin Capital is also relatively very bullish on the stock, dishing out 0.58 percent of its 13F equity portfolio to GDP.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Portolan Capital Management. 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 GDP as a viable investment and initiated a position in the stock.
Let’s check out hedge fund activity in other stocks similar to Goodrich Petroleum Corporation (NYSE:GDP). We will take a look at Blue Apron Holdings, Inc. (NYSE:APRN), Zynerba Pharmaceuticals Inc (NASDAQ:ZYNE), Bellerophon Therapeutics, Inc. (NASDAQ:BLPH), CVR Partners LP (NYSE:UAN), O2Micro International Limited (NASDAQ:OIIM), Park City Group, Inc. (NASDAQ:PCYG), and Senseonics Holdings, Inc. (NYSE:SENS). All of these stocks’ market caps match GDP’s market cap.
|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 4.9 hedge funds with bullish positions and the average amount invested in these stocks was $6 million. That figure was $19 million in GDP’s case. Senseonics Holdings, Inc. (NYSE:SENS) is the most popular stock in this table. On the other hand CVR Partners LP (NYSE:UAN) is the least popular one with only 2 bullish hedge fund positions. Goodrich Petroleum Corporation (NYSE:GDP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GDP is 44.2. 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. Our calculations showed that top 20 most popular stocks among hedge funds 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 and still beat the market by 16.1 percentage points. Hedge funds were also right about betting on GDP as the stock returned 58.1% since the end of Q3 (through 11/27) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.