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Did Hedge Funds Drop The Ball On Globalstar, Inc. (GSAT) ?

Reymerlyn Martin

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Globalstar, Inc. (PINK:GSAT).

Globalstar, Inc. (PINK:GSAT) was in 15 hedge funds' portfolios at the end of the first quarter of 2019. GSAT has seen an increase in activity from the world's largest hedge funds lately. There were 12 hedge funds in our database with GSAT positions at the end of the previous quarter. Our calculations also showed that GSAT isn't among the 30 most popular stocks among hedge funds.

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 market by 40 percentage points since May 2014 through May 30, 2019 (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 our short portfolio.

Michael Johnston - Steelhead Partners

We're going to view the latest hedge fund action encompassing Globalstar, Inc. (PINK:GSAT).

Hedge fund activity in Globalstar, Inc. (PINK:GSAT)

At Q1's end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from the fourth quarter of 2018. On the other hand, there were a total of 18 hedge funds with a bullish position in GSAT a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

GSAT_jun2019

The largest stake in Globalstar, Inc. (PINK:GSAT) was held by Mudrick Capital Management, which reported holding $43 million worth of stock at the end of March. It was followed by Warlander Asset Management with a $18.4 million position. Other investors bullish on the company included Steelhead Partners, 683 Capital Partners, and Mason Capital Management.

As aggregate interest increased, some big names have been driving this bullishness. Legion Partners Asset Management, managed by Ted White and Christopher Kiper, initiated the most outsized position in Globalstar, Inc. (PINK:GSAT). Legion Partners Asset Management had $3.4 million invested in the company at the end of the quarter. Jim Simons's Renaissance Technologies also made a $0.3 million investment in the stock during the quarter. The other funds with brand new GSAT positions are Ken Griffin's Citadel Investment Group and Dmitry Balyasny's Balyasny Asset Management.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Globalstar, Inc. (PINK:GSAT) but similarly valued. We will take a look at P.H. Glatfelter Company (NYSE:GLT), KNOT Offshore Partners LP (NYSE:KNOP), ChipMOS TECHNOLOGIES INC. (NASDAQ:IMOS), and G1 Therapeutics, Inc. (NASDAQ:GTHX). This group of stocks' market values match GSAT's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GLT,10,25489,4 KNOP,4,13665,-1 IMOS,2,25129,1 GTHX,11,19755,0 Average,6.75,21010,1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.75 hedge funds with bullish positions and the average amount invested in these stocks was $21 million. That figure was $95 million in GSAT's case. G1 Therapeutics, Inc. (NASDAQ:GTHX) is the most popular stock in this table. On the other hand ChipMOS TECHNOLOGIES INC. (NASDAQ:IMOS) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Globalstar, Inc. (PINK:GSAT) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Hedge funds were also right about betting on GSAT as the stock returned 32.6% during the same period and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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