Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in GigCapital2, Inc. (NYSE:GIX)? The smart money sentiment can provide an answer to this question.
GigCapital2, Inc. (NYSE:GIX) shareholders have witnessed an increase in hedge fund sentiment lately. GigCapital2, Inc. (NYSE:GIX) was in 14 hedge funds’ portfolios at the end of September. The all time high for this statistic is 10. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that GIX isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
At the moment there are tons of indicators investors put to use to appraise their stock investments. A duo of the most useful indicators are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the elite investment managers can outperform their index-focused peers by a healthy margin (see the details here).
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now we’re going to view the new hedge fund action regarding GigCapital2, Inc. (NYSE:GIX).
Do Hedge Funds Think GIX Is A Good Stock To Buy Now?
At the end of September, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 40% from the second quarter of 2020. On the other hand, there were a total of 8 hedge funds with a bullish position in GIX a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
The largest stake in GigCapital2, Inc. (NYSE:GIX) was held by Glazer Capital, which reported holding $16.5 million worth of stock at the end of September. It was followed by Fir Tree with a $10.9 million position. Other investors bullish on the company included Weiss Asset Management, Hudson Bay Capital Management, and Omni Partners. In terms of the portfolio weights assigned to each position Fort Baker Capital Management allocated the biggest weight to GigCapital2, Inc. (NYSE:GIX), around 1.7% of its 13F portfolio. Athos Capital is also relatively very bullish on the stock, setting aside 1.34 percent of its 13F equity portfolio to GIX.
As one would reasonably expect, key money managers were breaking ground themselves. Fort Baker Capital Management, managed by Steve Pigott, created the most outsized position in GigCapital2, Inc. (NYSE:GIX). Fort Baker Capital Management had $4.5 million invested in the company at the end of the quarter. Matthew Moskey and Friedrich Schulte-Hillen’s Athos Capital also made a $2.8 million investment in the stock during the quarter. The other funds with brand new GIX positions are Carl Tiedemann and Michael Tiedemann’s TIG Advisors, Phillip Goldstein, Andrew Dakos and Steven Samuels’s Bulldog Investors, and David Nguyen and Nancy Oh’s One68 Global Capital.
Let’s also examine hedge fund activity in other stocks similar to GigCapital2, Inc. (NYSE:GIX). These stocks are Nature’s Sunshine Products Inc (NASDAQ:NATR), Teekay Corporation (NYSE:TK), KalVista Pharmaceuticals, Inc. (NASDAQ:KALV), Genfit SA (NASDAQ:GNFT), Galera Therapeutics, Inc. (NASDAQ:GRTX), Peabody Energy Corporation (NYSE:BTU), and South Plains Financial, Inc. (NASDAQ:SPFI). All of these stocks’ market caps match GIX’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.9 hedge funds with bullish positions and the average amount invested in these stocks was $44 million. That figure was $71 million in GIX’s case. Peabody Energy Corporation (NYSE:BTU) is the most popular stock in this table. On the other hand Genfit SA (NASDAQ:GNFT) is the least popular one with only 1 bullish hedge fund positions. GigCapital2, Inc. (NYSE:GIX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GIX is 73.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and beat the market again by 16.2 percentage points. Unfortunately GIX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on GIX were disappointed as the stock returned 5.7% since the end of September (through 12/8) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.