In this article you are going to find out whether hedge funds think Gran Tierra Energy Inc. (NYSE:GTE) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
IS GTE a good stock to buy now? Gran Tierra Energy Inc. (NYSE:GTE) has experienced a decrease in activity from the world’s largest hedge funds in recent months. Gran Tierra Energy Inc. (NYSE:GTE) was in 7 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 22. Our calculations also showed that GTE 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 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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. Keeping this in mind let’s take a look at the key hedge fund action encompassing Gran Tierra Energy Inc. (NYSE:GTE).
What does smart money think about Gran Tierra Energy Inc. (NYSE:GTE)?
At third quarter’s end, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of -22% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GTE 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.
Among these funds, GMT Capital held the most valuable stake in Gran Tierra Energy Inc. (NYSE:GTE), which was worth $18.9 million at the end of the third quarter. On the second spot was Adage Capital Management which amassed $1.4 million worth of shares. Arrowstreet Capital, Renaissance Technologies, and Winton Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position GMT Capital allocated the biggest weight to Gran Tierra Energy Inc. (NYSE:GTE), around 1.37% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to GTE.
Judging by the fact that Gran Tierra Energy Inc. (NYSE:GTE) has experienced falling interest from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of fund managers that decided to sell off their entire stakes last quarter. It’s worth mentioning that Jonathan Barrett and Paul Segal’s Luminus Management said goodbye to the largest stake of the “upper crust” of funds tracked by Insider Monkey, valued at an estimated $0.2 million in stock, and John Overdeck and David Siegel’s Two Sigma Advisors was right behind this move, as the fund said goodbye to about $0.1 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 2 funds last quarter.
Let’s check out hedge fund activity in other stocks similar to Gran Tierra Energy Inc. (NYSE:GTE). These stocks are USD Partners LP (NYSE:USDP), Adams Resources & Energy Inc (NYSE:AE), Geospace Technologies Corp (NASDAQ:GEOS), Limbach Holdings, Inc. (NASDAQ:LMB), Gulfport Energy Corporation (NASDAQ:GPOR), RigNet Inc (NASDAQ:RNET), and Marlin Business Services Corp. (NASDAQ:MRLN). This group of stocks’ market values are similar to GTE’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 5 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $22 million in GTE’s case. Gulfport Energy Corporation (NASDAQ:GPOR) is the most popular stock in this table. On the other hand USD Partners LP (NYSE:USDP) is the least popular one with only 3 bullish hedge fund positions. Gran Tierra Energy Inc. (NYSE:GTE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GTE is 41.1. 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 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. Hedge funds were also right about betting on GTE as the stock returned 26.1% since the end of Q3 (through 12/2) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.