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Did Hedge Funds Drop The Ball On Gulfport Energy Corporation (GPOR) ?

Debasis Saha

In this article we will check out the progression of hedge fund sentiment towards Gulfport Energy Corporation (NASDAQ:GPOR) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Gulfport Energy Corporation (NASDAQ:GPOR) was in 9 hedge funds' portfolios at the end of the first quarter of 2020. GPOR investors should be aware of a decrease in hedge fund interest lately. There were 15 hedge funds in our database with GPOR holdings at the end of the previous quarter. Our calculations also showed that GPOR 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). Video: Watch our video about the top 5 most popular hedge fund stocks.

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 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 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 stocks that are in our short portfolio.

Greenlight Capital
Greenlight Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. 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. Keeping this in mind let's view the recent hedge fund action encompassing Gulfport Energy Corporation (NASDAQ:GPOR).

Hedge fund activity in Gulfport Energy Corporation (NASDAQ:GPOR)

At Q1's end, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -40% from one quarter earlier. By comparison, 23 hedge funds held shares or bullish call options in GPOR a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is GPOR A Good Stock To Buy?
Is GPOR A Good Stock To Buy?

Among these funds, Firefly Value Partners held the most valuable stake in Gulfport Energy Corporation (NASDAQ:GPOR), which was worth $9.3 million at the end of the third quarter. On the second spot was Shah Capital Management which amassed $5.2 million worth of shares. Renaissance Technologies, Greenlight Capital, 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 Shah Capital Management allocated the biggest weight to Gulfport Energy Corporation (NASDAQ:GPOR), around 4.07% of its 13F portfolio. Firefly Value Partners is also relatively very bullish on the stock, setting aside 1.75 percent of its 13F equity portfolio to GPOR.

Because Gulfport Energy Corporation (NASDAQ:GPOR) has experienced a decline in interest from the entirety of the hedge funds we track, logic holds that there lies a certain "tier" of hedgies that slashed their positions entirely by the end of the first quarter. At the top of the heap, Jonathan Barrett and Paul Segal's Luminus Management dumped the biggest stake of all the hedgies followed by Insider Monkey, comprising about $10.2 million in stock. Peter Rathjens, Bruce Clarke and John Campbell's fund, Arrowstreet Capital, also dumped its stock, about $2.9 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 6 funds by the end of the first quarter.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Gulfport Energy Corporation (NASDAQ:GPOR) but similarly valued. We will take a look at Navios Maritime Acquisition Corp (NYSE:NNA), Protalix BioTherapeutics Inc. (NYSE:PLX), SCYNEXIS Inc (NASDAQ:SCYX), and Monopar Therapeutics Inc. (NASDAQ:MNPR). This group of stocks' market valuations are similar to GPOR's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NNA,4,1726,-2 PLX,2,12470,1 SCYX,4,2543,-3 MNPR,1,85,0 Average,2.75,4206,-1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 2.75 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $16 million in GPOR's case. Navios Maritime Acquisition Corp (NYSE:NNA) is the most popular stock in this table. On the other hand Monopar Therapeutics Inc. (NASDAQ:MNPR) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Gulfport Energy Corporation (NASDAQ:GPOR) is more popular among hedge funds. 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 returned 13.4% in 2020 through June 22nd but still managed to beat the market by 15.9 percentage points. Hedge funds were also right about betting on GPOR as the stock returned 184.1% so far in Q2 (through June 22nd) 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.

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

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