How do we determine whether Golar LNG Limited (NASDAQ:GLNG) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Golar LNG Limited (NASDAQ:GLNG) investors should be aware of an increase in hedge fund interest recently. Our calculations also showed that GLNG isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
[caption id="attachment_255014" align="aligncenter" width="450"] Clint Carlson of Carlson Capital[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to take a glance at the key hedge fund action regarding Golar LNG Limited (NASDAQ:GLNG).
What does smart money think about Golar LNG Limited (NASDAQ:GLNG)?
At the end of the third quarter, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards GLNG over the last 17 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Orbis Investment Management was the largest shareholder of Golar LNG Limited (NASDAQ:GLNG), with a stake worth $140.1 million reported as of the end of September. Trailing Orbis Investment Management was Luxor Capital Group, which amassed a stake valued at $38.4 million. Carlson Capital, Pelham Capital, and Marshall Wace 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 Covalis Capital allocated the biggest weight to Golar LNG Limited (NASDAQ:GLNG), around 1.45% of its portfolio. Orbis Investment Management is also relatively very bullish on the stock, designating 1.03 percent of its 13F equity portfolio to GLNG.
As aggregate interest increased, key money managers have been driving this bullishness. ExodusPoint Capital, managed by Michael Gelband, created the most valuable position in Golar LNG Limited (NASDAQ:GLNG). ExodusPoint Capital had $2.3 million invested in the company at the end of the quarter. Peter Muller's PDT Partners also initiated a $2 million position during the quarter. The following funds were also among the new GLNG investors: Louis Bacon's Moore Global Investments, Jay Petschek and Steven Major's Corsair Capital Management, and Donald Sussman's Paloma Partners.
Let's also examine hedge fund activity in other stocks similar to Golar LNG Limited (NASDAQ:GLNG). We will take a look at BELLUS Health Inc. (NASDAQ:BLU), PBF Logistics LP (NYSE:PBFX), Aphria Inc. (NYSE:APHA), and Transportadora de Gas del Sur S.A. (NYSE:TGS). This group of stocks' market caps resemble GLNG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BLU,13,82956,13 PBFX,1,422,-2 APHA,5,2580,0 TGS,8,15061,-1 Average,6.75,25255,2.5 [/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 $25 million. That figure was $249 million in GLNG's case. BELLUS Health Inc. (NASDAQ:BLU) is the most popular stock in this table. On the other hand PBF Logistics LP (NYSE:PBFX) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Golar LNG Limited (NASDAQ:GLNG) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately GLNG wasn't nearly as popular as these 20 stocks and hedge funds that were betting on GLNG were disappointed as the stock returned 0.2% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.