Were Hedge Funds Right About Souring On Golar LNG Limited (GLNG)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Golar LNG Limited (NASDAQ:GLNG) and determine whether the smart money was really smart about this stock.

Is Golar LNG Limited (NASDAQ:GLNG) ready to rally soon? The smart money was taking a bearish view. The number of long hedge fund positions shrunk by 9 in recent months. Our calculations also showed that GLNG 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). GLNG was in 10 hedge funds’ portfolios at the end of the first quarter of 2020. There were 19 hedge funds in our database with GLNG holdings at the end of the previous quarter.

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 was 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Joe Huber - Huber Capital Management

Joe Huber of Huber Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. 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. Now let’s take a gander at the key hedge fund action regarding Golar LNG Limited (NASDAQ:GLNG).

What have hedge funds been doing with Golar LNG Limited (NASDAQ:GLNG)?

Heading into the second quarter of 2020, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -47% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GLNG over the last 18 quarters. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were upping their stakes significantly (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 $88.1 million at the end of the third quarter. On the second spot was Luxor Capital Group which amassed $36.1 million worth of shares. Huber Capital Management, Moore Global Investments, and Citadel Investment Group 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 1.63% of its 13F portfolio. Luxor Capital Group is also relatively very bullish on the stock, earmarking 1.09 percent of its 13F equity portfolio to GLNG.

Due to the fact that Golar LNG Limited (NASDAQ:GLNG) has faced declining sentiment from the entirety of the hedge funds we track, logic holds that there is a sect of fund managers who sold off their full holdings by the end of the first quarter. It’s worth mentioning that Louis Bacon’s Moore Global Investments said goodbye to the biggest investment of all the hedgies followed by Insider Monkey, comprising close to $7.1 million in stock, and Lee Ainslie’s Maverick Capital was right behind this move, as the fund cut about $4.5 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 9 funds by the end of the first quarter.

Let’s go over hedge fund activity in other stocks similar to Golar LNG Limited (NASDAQ:GLNG). These stocks are Unitil Corporation (NYSE:UTL), Rent-A-Center Inc (NASDAQ:RCII), Coeur Mining, Inc. (NYSE:CDE), and Adverum Biotechnologies, Inc. (NASDAQ:ADVM). This group of stocks’ market valuations are similar to GLNG’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
UTL 9 62219 -3
RCII 19 201014 -6
CDE 14 36482 -1
ADVM 25 352608 4
Average 16.75 163081 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $163 million. That figure was $154 million in GLNG’s case. Adverum Biotechnologies, Inc. (NASDAQ:ADVM) is the most popular stock in this table. On the other hand Unitil Corporation (NYSE:UTL) is the least popular one with only 9 bullish hedge fund positions. Golar LNG Limited (NASDAQ:GLNG) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 12.3% in 2020 through June 30th and surpassed the market by 15.5 percentage points. Unfortunately GLNG wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); GLNG investors were disappointed as the stock returned -8.1% during the second quarter 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 most of these stocks already outperformed the market in 2020.

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