Is GPMT A Good Stock To Buy Now?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Granite Point Mortgage Trust Inc. (NYSE:GPMT).

Is GPMT a good stock to buy now? Hedge funds were in an optimistic mood. The number of long hedge fund bets increased by 3 recently. Granite Point Mortgage Trust Inc. (NYSE:GPMT) was in 13 hedge funds’ portfolios at the end of September. The all time high for this statistic is 12. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that GPMT 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). There were 10 hedge funds in our database with GPMT holdings at the end of June.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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.

Dmitry Balyasny of Balyasny Asset Managemnet

Dmitry Balyasny of Balyasny Asset Management

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 we’re going to analyze the key hedge fund action encompassing Granite Point Mortgage Trust Inc. (NYSE:GPMT).

Do Hedge Funds Think GPMT Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2020, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 30% from the previous quarter. On the other hand, there were a total of 8 hedge funds with a bullish position in GPMT a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Granite Point Mortgage Trust Inc. (NYSE:GPMT) was held by Balyasny Asset Management, which reported holding $4.5 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $3.4 million position. Other investors bullish on the company included Winton Capital Management, Granite Point Capital, and Millennium Management. In terms of the portfolio weights assigned to each position Axar Capital allocated the biggest weight to Granite Point Mortgage Trust Inc. (NYSE:GPMT), around 2.54% of its 13F portfolio. Ellington is also relatively very bullish on the stock, earmarking 0.27 percent of its 13F equity portfolio to GPMT.

Now, specific money managers were breaking ground themselves. Renaissance Technologies, created the most valuable position in Granite Point Mortgage Trust Inc. (NYSE:GPMT). Renaissance Technologies had $1.1 million invested in the company at the end of the quarter. Mike Vranos’s Ellington also initiated a $0.8 million position during the quarter. The following funds were also among the new GPMT investors: Donald Sussman’s Paloma Partners, Paul Tudor Jones’s Tudor Investment Corp, and Thomas Bailard’s Bailard Inc.

Let’s also examine hedge fund activity in other stocks similar to Granite Point Mortgage Trust Inc. (NYSE:GPMT). These stocks are Kimball International Inc (NASDAQ:KBAL), Golden Entertainment Inc (NASDAQ:GDEN), Arrow Financial Corporation (NASDAQ:AROW), BioSpecifics Technologies Corp. (NASDAQ:BSTC), Xenon Pharmaceuticals Inc (NASDAQ:XENE), Ruth’s Hospitality Group, Inc. (NASDAQ:RUTH), and Resolute Forest Products Inc (NYSE:RFP). This group of stocks’ market valuations match GPMT’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KBAL 19 68221 3
GDEN 12 67167 -3
AROW 3 10861 0
BSTC 9 48738 1
XENE 26 195443 -1
RUTH 11 39044 -3
RFP 13 170346 5
Average 13.3 85689 0.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.3 hedge funds with bullish positions and the average amount invested in these stocks was $86 million. That figure was $21 million in GPMT’s case. Xenon Pharmaceuticals Inc (NASDAQ:XENE) is the most popular stock in this table. On the other hand Arrow Financial Corporation (NASDAQ:AROW) is the least popular one with only 3 bullish hedge fund positions. Granite Point Mortgage Trust Inc. (NYSE:GPMT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for GPMT is 59.7. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on GPMT as the stock returned 45.4% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.

Follow Granite Point Mortgage Trust Inc. (NYSE:GPMT)

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