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Ferroglobe PLC (GSM): Hedge Funds Done Selling

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Debasis Saha
·6 min read
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The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtFerroglobe PLC (NASDAQ:GSM) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Ferroglobe PLC (NASDAQ:GSM) has experienced an increase in hedge fund interest lately. GSM was in 11 hedge funds' portfolios at the end of March. There were 7 hedge funds in our database with GSM positions at the end of the previous quarter. Our calculations also showed that GSM 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.

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research was 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_687238" align="aligncenter" width="400"]

Philip Hempleman Ardsley Partners
Philip Hempleman Ardsley Partners

Philip Hempleman of Ardsley Partners[/caption]

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. 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. Now we're going to take a look at the latest hedge fund action regarding Ferroglobe PLC (NASDAQ:GSM).

How have hedgies been trading Ferroglobe PLC (NASDAQ:GSM)?

At Q1's end, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 57% from the previous quarter. On the other hand, there were a total of 11 hedge funds with a bullish position in GSM a year ago. With hedgies' capital changing hands, there exists a select group of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Is GSM A Good Stock To Buy?
Is GSM A Good Stock To Buy?

Among these funds, Adage Capital Management held the most valuable stake in Ferroglobe PLC (NASDAQ:GSM), which was worth $6.5 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $1.2 million worth of shares. Royce & Associates, Hosking Partners, and D E Shaw 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 Hosking Partners allocated the biggest weight to Ferroglobe PLC (NASDAQ:GSM), around 0.03% of its 13F portfolio. Trellus Management Company is also relatively very bullish on the stock, earmarking 0.03 percent of its 13F equity portfolio to GSM.

As one would reasonably expect, specific money managers were leading the bulls' herd. Citadel Investment Group, managed by Ken Griffin, established the biggest position in Ferroglobe PLC (NASDAQ:GSM). Citadel Investment Group had $0 million invested in the company at the end of the quarter. Adam Usdan's Trellus Management Company also initiated a $0 million position during the quarter. The other funds with brand new GSM positions are Philip Hempleman's Ardsley Partners and David Harding's Winton Capital Management.

Let's check out hedge fund activity in other stocks similar to Ferroglobe PLC (NASDAQ:GSM). These stocks are Park City Group, Inc. (NYSE:PCYG), Briggs & Stratton Corporation (NYSE:BGG), Clearside Biomedical, Inc. (NASDAQ:CLSD), and Catalyst Biosciences Inc (NASDAQ:CBIO). This group of stocks' market caps resemble GSM's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PCYG,2,483,-1 BGG,4,5425,-4 CLSD,4,944,1 CBIO,12,29102,-3 Average,5.5,8989,-1.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 5.5 hedge funds with bullish positions and the average amount invested in these stocks was $9 million. That figure was $10 million in GSM's case. Catalyst Biosciences Inc (NASDAQ:CBIO) is the most popular stock in this table. On the other hand Park City Group, Inc. (NYSE:PCYG) is the least popular one with only 2 bullish hedge fund positions. Ferroglobe PLC (NASDAQ:GSM) is not the most popular stock in this group but hedge fund interest is still above average. 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 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 gained 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately GSM wasn't nearly as popular as these 10 stocks and hedge funds that were betting on GSM were disappointed as the stock returned 8.7% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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

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