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 Greenlight Capital Re, Ltd. (NASDAQ:GLRE).
Greenlight Capital Re, Ltd. (NASDAQ:GLRE) investors should be aware of a decrease in hedge fund interest recently. Greenlight Capital Re, Ltd. (NASDAQ:GLRE) was in 4 hedge funds’ portfolios at the end of September. The all time high for this statistics is 14. There were 6 hedge funds in our database with GLRE holdings at the end of June. Our calculations also showed that GLRE 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
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 10 most profitable companies in the world 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. Now let’s check out the recent hedge fund action encompassing Greenlight Capital Re, Ltd. (NASDAQ:GLRE).
How have hedgies been trading Greenlight Capital Re, Ltd. (NASDAQ:GLRE)?
At the end of September, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -33% from the previous quarter. By comparison, 13 hedge funds held shares or bullish call options in GLRE a year ago. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Citadel Investment Group, managed by Ken Griffin, holds the most valuable position in Greenlight Capital Re, Ltd. (NASDAQ:GLRE). Citadel Investment Group has a $0.5 million call position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Mark Kleiman of Factorial Partners, with a $0.3 million position; 0.3% of its 13F portfolio is allocated to the stock. Other members of the smart money that hold long positions encompass Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Ken Griffin’s Citadel Investment Group and John A. Levin’s Levin Capital Strategies. In terms of the portfolio weights assigned to each position Factorial Partners allocated the biggest weight to Greenlight Capital Re, Ltd. (NASDAQ:GLRE), around 0.34% of its 13F portfolio. Levin Capital Strategies is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to GLRE.
Since Greenlight Capital Re, Ltd. (NASDAQ:GLRE) has experienced declining sentiment from the entirety of the hedge funds we track, logic holds that there exists a select few fund managers who sold off their positions entirely last quarter. At the top of the heap, Donald Sussman’s Paloma Partners dumped the largest stake of the 750 funds monitored by Insider Monkey, valued at close to $0.2 million in stock. Murray Stahl’s fund, Horizon Asset Management, also said goodbye to its stock, about $0.2 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 2 funds last quarter.
Let’s now review hedge fund activity in other stocks similar to Greenlight Capital Re, Ltd. (NASDAQ:GLRE). These stocks are Preformed Line Products Company (NASDAQ:PLPC), Sierra Metals Inc. (NYSE:SMTS), Gold Resource Corporation (NYSE:GORO), American Renal Associates Holdings, Inc (NYSE:ARA), TELA Bio, Inc. (NASDAQ:TELA), Eiger BioPharmaceuticals, Inc. (NASDAQ:EIGR), and Value Line, Inc. (NASDAQ:VALU). This group of stocks’ market values match GLRE’s market value.
|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 7.4 hedge funds with bullish positions and the average amount invested in these stocks was $46 million. That figure was $1 million in GLRE’s case. Eiger BioPharmaceuticals, Inc. (NASDAQ:EIGR) is the most popular stock in this table. On the other hand Value Line, Inc. (NASDAQ:VALU) is the least popular one with only 2 bullish hedge fund positions. Greenlight Capital Re, Ltd. (NASDAQ:GLRE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for GLRE is 15.7. 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. A small number of hedge funds were also right about betting on GLRE as the stock returned 22.3% since the end of the third quarter (through 11/27) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.