Where Do Hedge Funds Stand On Great Elm Capital Corp. (GECC)?

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 Great Elm Capital Corp. (NASDAQ:GECC)? The smart money sentiment can provide an answer to this question.

Is Great Elm Capital Corp. (NASDAQ:GECC) the right pick for your portfolio? Hedge funds were in an optimistic mood. The number of bullish hedge fund bets moved up by 1 lately. Great Elm Capital Corp. (NASDAQ:GECC) was in 5 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 4. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that GECC 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.

To the average investor there are tons of metrics investors have at their disposal to appraise stocks. A duo of the most underrated metrics are hedge fund and insider trading moves. We have shown that, historically, those who follow the best picks of the elite investment managers can outperform the S&P 500 by a healthy amount (see the details here).

David Siegel of Two Sigma Advisors

David Siegel of Two Sigma Advisors

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 check out the new hedge fund action encompassing Great Elm Capital Corp. (NASDAQ:GECC).

What does smart money think about Great Elm Capital Corp. (NASDAQ:GECC)?

At the end of September, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in GECC over the last 21 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is GECC A Good Stock To Buy?

The largest stake in Great Elm Capital Corp. (NASDAQ:GECC) was held by Arrowstreet Capital, which reported holding $0.4 million worth of stock at the end of September. It was followed by Two Sigma Advisors with a $0.2 million position. Other investors bullish on the company included Millennium Management, Citadel Investment Group, and Cove Street Capital. In terms of the portfolio weights assigned to each position Cove Street Capital allocated the biggest weight to Great Elm Capital Corp. (NASDAQ:GECC), around 0.0021% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, setting aside 0.0006 percent of its 13F equity portfolio to GECC.

Now, specific money managers were leading the bulls’ herd. Millennium Management, managed by Israel Englander, established the most outsized position in Great Elm Capital Corp. (NASDAQ:GECC). Millennium Management had $0.1 million invested in the company at the end of the quarter.

Let’s check out hedge fund activity in other stocks similar to Great Elm Capital Corp. (NASDAQ:GECC). These stocks are Beasley Broadcast Group Inc (NASDAQ:BBGI), Polar Power, Inc. (NASDAQ:POLA), Navios Maritime Containers L.P. (NASDAQ:NMCI), U.S. Global Investors, Inc. (NASDAQ:GROW), Vaccinex, Inc. (NASDAQ:VCNX), Communications Systems, Inc. (NASDAQ:JCS), and Nine Energy Service, Inc. (NYSE:NINE). This group of stocks’ market valuations are closest to GECC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BBGI 2 1495 0
POLA 2 1344 -1
NMCI 3 5793 0
GROW 5 5976 3
VCNX 1 82 -1
JCS 2 5498 -1
NINE 6 2971 -6
Average 3 3308 -0.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 3 hedge funds with bullish positions and the average amount invested in these stocks was $3 million. That figure was $1 million in GECC’s case. Nine Energy Service, Inc. (NYSE:NINE) is the most popular stock in this table. On the other hand Vaccinex, Inc. (NASDAQ:VCNX) is the least popular one with only 1 bullish hedge fund positions. Great Elm Capital Corp. (NASDAQ:GECC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GECC is 76. 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. 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 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. Hedge funds were also right about betting on GECC as the stock returned 12.5% since the end of Q3 (through 11/27) 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.