Is GSI Technology, Inc. (GSIT) Going to Burn These Hedge Funds?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of GSI Technology, Inc. (NASDAQ:GSIT).

Is GSI Technology, Inc. (NASDAQ:GSIT) a great stock to buy now? Prominent investors were taking a pessimistic view. The number of bullish hedge fund positions retreated by 1 lately. GSI Technology, Inc. (NASDAQ:GSIT) was in 4 hedge funds’ portfolios at the end of September. The all time high for this statistics is 8. Our calculations also showed that GSIT 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings 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’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.

John Rogers Ariel Investments

John Rogers of Ariel Investments

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 10 most profitable companies in the world 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. Keeping this in mind let’s take a peek at the key hedge fund action encompassing GSI Technology, Inc. (NASDAQ:GSIT).

What does smart money think about GSI Technology, Inc. (NASDAQ:GSIT)?

At the end of September, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from the previous quarter. The graph below displays the number of hedge funds with bullish position in GSIT over the last 21 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Renaissance Technologies, holds the most valuable position in GSI Technology, Inc. (NASDAQ:GSIT). Renaissance Technologies has a $5.2 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Roumell Asset Management, managed by Jim Roumell, which holds a $5 million position; the fund has 10% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions consist of John W. Rogers’s Ariel Investments, David Harding’s Winton Capital Management and . In terms of the portfolio weights assigned to each position Roumell Asset Management allocated the biggest weight to GSI Technology, Inc. (NASDAQ:GSIT), around 10.01% of its 13F portfolio. Ariel Investments is also relatively very bullish on the stock, setting aside 0.03 percent of its 13F equity portfolio to GSIT.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Springbok Capital. 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 GSIT as a viable investment and initiated a position in the stock.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as GSI Technology, Inc. (NASDAQ:GSIT) but similarly valued. We will take a look at Nano Dimension Ltd. (NASDAQ:NNDM), Bel Fuse, Inc. (NASDAQ:BELFB), Radcom Ltd. (NASDAQ:RDCM), Evolus, Inc. (NASDAQ:EOLS), Actinium Pharmaceuticals Inc (NYSE:ATNM), Minerva Neurosciences, Inc (NASDAQ:NERV), and Genprex, Inc. (NASDAQ:GNPX). This group of stocks’ market valuations are similar to GSIT’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NNDM 2 172 1
BELFB 7 11262 -1
RDCM 4 9676 0
EOLS 10 2356 1
ATNM 6 10618 -1
NERV 15 11835 1
GNPX 2 311 -1
Average 6.6 6604 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.6 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $13 million in GSIT’s case. Minerva Neurosciences, Inc (NASDAQ:NERV) is the most popular stock in this table. On the other hand Nano Dimension Ltd. (NASDAQ:NNDM) is the least popular one with only 2 bullish hedge fund positions. GSI Technology, Inc. (NASDAQ:GSIT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for GSIT is 26.7. 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 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on GSIT as the stock returned 21.5% since the end of the third quarter (through 11/27) and outperformed the market by an even larger margin.

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