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Should You Buy GS Acquisition Holdings Corp. (GSAH)?

“Market volatility has picked up again over the past few weeks. Headlines highlight risks regarding interest rates, the Fed, China, house prices, auto sales, trade wars, and more. Uncertainty abounds. But doesn’t it always? I have no view on whether the recent volatility will continue for a while, or whether the market will be back at all-time highs before we know it. I remain focused on preserving and growing our capital, and continue to believe that the best way to do so is via a value-driven, concentrated, patient approach. I shun consensus holdings, rich valuations, and market fads, in favor of solid, yet frequently off-the-beaten-path, businesses run by excellent, aligned management teams, purchased at deep discounts to intrinsic value,” are the words of Maran Capital’s Dan Roller. His stock picks have been beating the S&P 500 Index handily. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards GS Acquisition Holdings Corp. (NYSE:GSAH) and see how it was affected.

Hedge fund interest in GS Acquisition Holdings Corp. (NYSE:GSAH) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare GSAH to other stocks including Thermon Group Holdings, Inc. (NYSE:THR), Granite Point Mortgage Trust Inc. (NYSE:GPMT), and TCP Capital Corp (NASDAQ:TCPC) to get a better sense of its popularity.

In today’s marketplace there are plenty of gauges stock traders can use to value publicly traded companies. A couple of the most under-the-radar gauges are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the top picks of the best money managers can trounce the market by a very impressive amount (see the details here).

Phill Gross, Adage Capital Management

We’re going to take a glance at the key hedge fund action encompassing GS Acquisition Holdings Corp. (NYSE:GSAH).

Hedge fund activity in GS Acquisition Holdings Corp. (NYSE:GSAH)

Heading into the fourth quarter of 2018, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, no change from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in GSAH over the last 13 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

GSAH_dec2018

According to Insider Monkey’s hedge fund database, Isaac Corre’s Governors Lane has the most valuable position in GS Acquisition Holdings Corp. (NYSE:GSAH), worth close to $37.7 million, amounting to 2.1% of its total 13F portfolio. The second largest stake is held by Empyrean Capital Partners, managed by Michael A. Price and Amos Meron, which holds a $31 million position; 1% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors that are bullish consist of Phill Gross and Robert Atchinson’s Adage Capital Management, Glenn Russell Dubin’s Highbridge Capital Management and Stephen J. Errico’s Locust Wood Capital Advisers.

Judging by the fact that GS Acquisition Holdings Corp. (NYSE:GSAH) has witnessed bearish sentiment from the entirety of the hedge funds we track, logic holds that there were a few funds who sold off their entire stakes in the third quarter. Interestingly, Jeffrey Tannenbaum’s Fir Tree sold off the largest position of the 700 funds monitored by Insider Monkey, worth close to $17.4 million in stock, and Glenn Russell Dubin’s Highbridge Capital Management was right behind this move, as the fund dumped about $17.4 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks similar to GS Acquisition Holdings Corp. (NYSE:GSAH). These stocks are Thermon Group Holdings, Inc. (NYSE:THR), Granite Point Mortgage Trust Inc. (NYSE:GPMT), TCP Capital Corp (NASDAQ:TCPC), and P.H. Glatfelter Company (NYSE:GLT). This group of stocks’ market caps are similar to GSAH’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
THR 10 46858 4
GPMT 6 20519 0
TCPC 10 19293 1
GLT 4 11422 0
Average 7.5 24523 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.5 hedge funds with bullish positions and the average amount invested in these stocks was $25 million. That figure was $381 million in GSAH’s case. Thermon Group Holdings, Inc. (NYSE:THR) is the most popular stock in this table. On the other hand P.H. Glatfelter Company (NYSE:GLT) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks GS Acquisition Holdings Corp. (NYSE:GSAH) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

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

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