Was The Smart Money Right About Golar LNG Limited (GLNG)?

Hedge funds don’t get the respect they used to get. Nowadays investors prefer passive funds over actively managed funds. One thing they don’t realize is that 100% of the passive funds didn’t see the coronavirus recession coming, but a lot of hedge funds did. Even we published an article near the end of February and predicted a US recession. Think about all the losses you could have avoided if you sold your shares in February and bought them back at the end of March. In this article we are going to analyze the smart money sentiment towards Golar LNG Limited (NASDAQ:GLNG).

Golar LNG Limited (NASDAQ:GLNG) shareholders have witnessed a decrease in hedge fund sentiment in recent months. Our calculations also showed that GLNG isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

To most stock holders, hedge funds are assumed to be underperforming, outdated financial tools of yesteryear. While there are over 8000 funds with their doors open at present, Our researchers look at the upper echelon of this club, about 850 funds. Most estimates calculate that this group of people control the lion’s share of all hedge funds’ total asset base, and by following their matchless investments, Insider Monkey has brought to light several investment strategies that have historically outpaced the market. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

Christian Leone of Luxor Capital Group

We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with 77% accuracy, so we check out his stock picks. A former hedge fund manager is pitching the “next Amazon” in this video; again we are listening. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a gander at the latest hedge fund action encompassing Golar LNG Limited (NASDAQ:GLNG).

What does smart money think about Golar LNG Limited (NASDAQ:GLNG)?

At the end of the fourth quarter, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -27% from the third quarter of 2019. By comparison, 32 hedge funds held shares or bullish call options in GLNG a year ago. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

Among these funds, Orbis Investment Management held the most valuable stake in Golar LNG Limited (NASDAQ:GLNG), which was worth $157.6 million at the end of the third quarter. On the second spot was Luxor Capital Group which amassed $43.5 million worth of shares. Millennium Management, Huber Capital Management, and Moore Global Investments 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 Huber Capital Management allocated the biggest weight to Golar LNG Limited (NASDAQ:GLNG), around 1.31% of its 13F portfolio. Luxor Capital Group is also relatively very bullish on the stock, designating 1.14 percent of its 13F equity portfolio to GLNG.

Due to the fact that Golar LNG Limited (NASDAQ:GLNG) has faced bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there is a sect of fund managers that elected to cut their entire stakes last quarter. Intriguingly, Christian Leone’s Luxor Capital Group said goodbye to the largest position of the “upper crust” of funds monitored by Insider Monkey, valued at an estimated $13 million in stock. Ross Turner’s fund, Pelham Capital, also sold off its stock, about $8.4 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 7 funds last quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Golar LNG Limited (NASDAQ:GLNG) but similarly valued. These stocks are Infinera Corp. (NASDAQ:INFN), Helix Energy Solutions Group Inc. (NYSE:HLX), iRobot Corporation (NASDAQ:IRBT), and The RMR Group Inc. (NASDAQ:RMR). This group of stocks’ market values resemble GLNG’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
INFN 17 285686 -1
HLX 20 46141 6
IRBT 13 50479 1
RMR 21 122251 -1
Average 17.75 126139 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $126 million. That figure was $254 million in GLNG’s case. The RMR Group Inc. (NASDAQ:RMR) is the most popular stock in this table. On the other hand iRobot Corporation (NASDAQ:IRBT) is the least popular one with only 13 bullish hedge fund positions. Golar LNG Limited (NASDAQ:GLNG) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately GLNG wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on GLNG were disappointed as the stock returned -56.1% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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