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Were Hedge Funds Right About Souring On GasLog Ltd (GLOG)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of GasLog Ltd (NYSE:GLOG) based on that data and determine whether they were really smart about the stock.

GasLog Ltd (NYSE:GLOG) investors should be aware of a decrease in hedge fund interest lately. GLOG was in 13 hedge funds’ portfolios at the end of March. There were 15 hedge funds in our database with GLOG holdings at the end of the previous quarter. Our calculations also showed that GLOG 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 58 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

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 states that pay the most federal taxes to identify emerging trends that are likely to lead to 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. With all of this in mind let’s go over the new hedge fund action encompassing GasLog Ltd (NYSE:GLOG).

What have hedge funds been doing with GasLog Ltd (NYSE:GLOG)?

At the end of the first quarter, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the previous quarter. By comparison, 11 hedge funds held shares or bullish call options in GLOG a year ago. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

Among these funds, Millennium Management held the most valuable stake in GasLog Ltd (NYSE:GLOG), which was worth $4.6 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $4.4 million worth of shares. Royce & Associates, GLG Partners, and PDT Partners 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 Algert Coldiron Investors allocated the biggest weight to GasLog Ltd (NYSE:GLOG), around 0.07% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, dishing out 0.05 percent of its 13F equity portfolio to GLOG.

Because GasLog Ltd (NYSE:GLOG) has faced falling interest from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of fund managers who sold off their full holdings heading into Q4. Intriguingly, Steve Cohen’s Point72 Asset Management dropped the largest position of the “upper crust” of funds followed by Insider Monkey, totaling an estimated $9.5 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund cut about $0.3 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks similar to GasLog Ltd (NYSE:GLOG). We will take a look at Cheetah Mobile Inc (NYSE:CMCM), Oceaneering International, Inc. (NYSE:OII), Clarus Corporation (NASDAQ:CLAR), and Financial Institutions, Inc. (NASDAQ:FISI). This group of stocks’ market valuations are closest to GLOG’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CMCM 4 4160 0
OII 19 29958 -5
CLAR 11 34032 0
FISI 11 23795 0
Average 11.25 22986 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $23 million. That figure was $13 million in GLOG’s case. Oceaneering International, Inc. (NYSE:OII) is the most popular stock in this table. On the other hand Cheetah Mobile Inc (NYSE:CMCM) is the least popular one with only 4 bullish hedge fund positions. GasLog Ltd (NYSE:GLOG) 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 13.3% in 2020 through June 25th but beat the market by 16.8 percentage points. Unfortunately GLOG wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on GLOG were disappointed as the stock returned -23.5% 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.

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