Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
GP Investments Acquisition Corp (NASDAQ:GPIAU) was in 8 hedge funds’ portfolios at the end of the third quarter of 2015. GPIAU has experienced a decrease in activity from the world’s largest hedge funds in recent months. There were 9 hedge funds in our database with GPIAU positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as INVUITY INC COM USD0.001 (NASDAQ:IVTY), StealthGas Inc. (NASDAQ:GASS), and VirnetX Holding Corporation (NYSEAMEX:VHC) to gather more data points.
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To most market participants, hedge funds are seen as underperforming, outdated financial tools of the past. While there are more than 8000 funds trading at the moment, we hone in on the leaders of this club, around 700 funds. These money managers command the lion’s share of the smart money’s total asset base, and by keeping track of their top equity investments, Insider Monkey has found a few investment strategies that have historically outpaced Mr. Market. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points per annum for a decade in their back tests.
With all of this in mind, we’re going to take a look at the fresh action encompassing GP Investments Acquisition Corp (NASDAQ:GPIAU).
What have hedge funds been doing with GP Investments Acquisition Corp (NASDAQ:GPIAU)?
At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Arrowgrass Capital Partners, managed by Nick Niell, holds the number one position in GP Investments Acquisition Corp (NASDAQ:GPIAU). Arrowgrass Capital Partners has a $12.7 million position in the stock, comprising 0.2% of its 13F portfolio. On Arrowgrass Capital Partners’s heels is Roystone Capital Partners, managed by Richard Barrera, which holds an $9.9 million position; 0.5% of its 13F portfolio is allocated to the stock. Remaining professional money managers with similar optimism consist of Matthew Halbower’s Pentwater Capital Management, Louis Bacon’s Moore Global Investments and John A. Levin’s Levin Capital Strategies.
Because GP Investments Acquisition Corp (NASDAQ:GPIAU) has faced declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of fund managers who sold off their entire stakes last quarter. Interestingly, Nick Niell’s Arrowgrass Capital Partners cut the largest stake of all the hedgies tracked by Insider Monkey, valued at about $12.5 million in stock, and Matthew Halbower of Pentwater Capital Management was right behind this move, as the fund dropped about $8 million worth of shares. These moves are important to note, as total hedge fund interest fell by 1 funds last quarter.
Let’s go over hedge fund activity in other stocks similar to GP Investments Acquisition Corp (NASDAQ:GPIAU). We will take a look at INVUITY INC COM USD0.001 (NASDAQ:IVTY), StealthGas Inc. (NASDAQ:GASS), VirnetX Holding Corporation (NYSEAMEX:VHC), and Medallion Financial Corp (NASDAQ:TAXI). This group of stocks’ market caps match GPIAU’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IVTY | 6 | 16902 | 1 |
| GASS | 9 | 64659 | -2 |
| VHC | 5 | 1776 | 2 |
| TAXI | 7 | 8361 | -6 |
As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $23 million, below the $50 million that hedge funds have collectively amassed in GPIAU. StealthGas Inc. (NASDAQ:GASS) is the most popular stock in this table with nine funds owning shares. On the other hand VirnetX Holding Corporation (NYSEAMEX:VHC) is the least popular one with only 5 bullish hedge fund positions. GP Investments Acquisition Corp (NASDAQ:GPIAU) 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. In this regard GASS might be a better candidate to consider investing in.
