Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market.
The stock of the reinsurance company Greenlight Capital Re, Ltd. (NASDAQ:GLRE) has plunged since the beginning of the year, which has in turn led to a decline in the interest towards the stock among the funds we track. The company was in 13 hedge funds’ portfolios at the end of the third quarter of 2015, compared to 16 hedge funds in our database with GLRE holdings at the end of the previous quarter. At the end of this article we will also compare GLRE to other stocks including Trina Solar Limited (ADR) (NYSE:TSL), PDL BioPharma Inc. (NASDAQ:PDLI), and Wilshire Bancorp Inc (NASDAQ:WIBC) to get a better sense of its popularity.
If you’d ask most investors, hedge funds are assumed to be worthless, outdated investment tools of years past. While there are over 8000 funds in operation today, We hone in on the elite of this club, approximately 700 funds. These money managers direct bulk of the hedge fund industry’s total asset base, and by monitoring their finest investments, Insider Monkey has spotted a number of investment strategies that have historically outrun the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy defeated the S&P 500 index by 12 percentage points per annum for a decade in their back tests.
Now, let’s take a look at the fresh action regarding Greenlight Capital Re, Ltd. (NASDAQ:GLRE).
How have hedgies been trading Greenlight Capital Re, Ltd. (NASDAQ:GLRE)?
At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock. Among these funds, Royce & Associates, managed by Chuck Royce, holds the most valuable position in Greenlight Capital Re, Ltd. (NASDAQ:GLRE). Royce & Associates has a $20.4 million position in the stock, comprising 0.1% of its 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies holding a $7.6 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other professional money managers that hold long positions contain Matthew A. Weatherbie’s Weatherbie Capital, Murray Stahl’s Horizon Asset Management, and Dmitry Balyasny’s Balyasny Asset Management.
Because Greenlight Capital Re, Ltd. (NASDAQ:GLRE) has faced declining sentiment from the smart money, logic holds that there were a few hedgies that decided to sell off their positions entirely in the third quarter. At the top of the heap, Zeke Ashton’s Centaur Capital Partners dropped the biggest position of the 700 funds monitored by Insider Monkey, valued at an estimated $2.7 million in stock. Roger Ibbotson’s fund, Zebra Capital Management, also dropped its stock, about $1.3 million worth.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Greenlight Capital Re, Ltd. (NASDAQ:GLRE) but similarly valued. These stocks are Trina Solar Limited (ADR) (NYSE:TSL), PDL BioPharma Inc. (NASDAQ:PDLI), Wilshire Bancorp Inc (NASDAQ:WIBC), and National CineMedia, Inc. (NASDAQ:NCMI). This group of stocks’ market values resemble GLRE’s market value.
|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 17 hedge funds with bullish positions and the average amount invested in these stocks was $115 million. That figure was just $48 million in GLRE’s case. PDL BioPharma Inc. (NASDAQ:PDLI) is the most popular stock in this table with a total of 20 funds reporting long positions. On the other hand Wilshire Bancorp Inc (NASDAQ:WIBC) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Greenlight Capital Re, Ltd. (NASDAQ:GLRE) is even less popular than WIBC. 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.