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Were Hedge Funds Right About Betting On Geopark Ltd (GPRK)?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Geopark Ltd (NYSE:GPRK) and determine whether hedge funds had an edge regarding this stock.

Is Geopark Ltd (NYSE:GPRK) a healthy stock for your portfolio? Hedge funds were taking an optimistic view. The number of bullish hedge fund positions rose by 2 recently. Our calculations also showed that GPRK isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

In the 21st century investor’s toolkit there are tons of tools stock market investors use to value stocks. A couple of the less utilized tools are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the top picks of the best hedge fund managers can outpace their index-focused peers by a superb margin (see the details here).

Phill Gross of Adage Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 10 most profitable companies in the world to identify emerging companies that are likely to deliver 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the latest hedge fund action surrounding Geopark Ltd (NYSE:GPRK).

How have hedgies been trading Geopark Ltd (NYSE:GPRK)?

At Q1’s end, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards GPRK over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Geopark Ltd (NYSE:GPRK) was held by Renaissance Technologies, which reported holding $31 million worth of stock at the end of September. It was followed by Encompass Capital Advisors with a $9.8 million position. Other investors bullish on the company included D E Shaw, Arrowstreet Capital, and Royce & Associates. In terms of the portfolio weights assigned to each position Encompass Capital Advisors allocated the biggest weight to Geopark Ltd (NYSE:GPRK), around 1.05% of its 13F portfolio. Navellier & Associates is also relatively very bullish on the stock, designating 0.06 percent of its 13F equity portfolio to GPRK.

Consequently, key hedge funds have jumped into Geopark Ltd (NYSE:GPRK) headfirst. Adage Capital Management, managed by Phill Gross and Robert Atchinson, created the largest position in Geopark Ltd (NYSE:GPRK). Adage Capital Management had $0.9 million invested in the company at the end of the quarter. Greg Eisner’s Engineers Gate Manager also initiated a $0.2 million position during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace’s Marshall Wace LLP and Mike Vranos’s Ellington.

Let’s now review hedge fund activity in other stocks similar to Geopark Ltd (NYSE:GPRK). We will take a look at ProSight Global, Inc. (NYSE:PROS), TPG RE Finance Trust, Inc. (NYSE:TRTX), Amyris Inc (NASDAQ:AMRS), and Arrow Financial Corporation (NASDAQ:AROW). All of these stocks’ market caps match GPRK’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PROS 4 3547 0
TRTX 17 29436 2
AMRS 10 30419 0
AROW 4 13074 -1
Average 8.75 19119 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $19 million. That figure was $49 million in GPRK’s case. TPG RE Finance Trust, Inc. (NYSE:TRTX) is the most popular stock in this table. On the other hand ProSight Global, Inc. (NYSE:PROS) is the least popular one with only 4 bullish hedge fund positions. Geopark Ltd (NYSE:GPRK) is not the most popular stock in this group but hedge fund interest is still above average. 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 13.3% in 2020 through June 25th but still beat the market by 16.8 percentage points. Hedge funds were also right about betting on GPRK as the stock returned 37.9% in Q2 (through June 25th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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