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Is Granite Point Mortgage Trust Inc. (GPMT) A Good Stock To Buy?

Reymerlyn Martin

As we already know from media reports and hedge fund investor letters, many hedge funds lost money in fourth quarter, blaming macroeconomic conditions and unpredictable events that hit several sectors, with technology among them. Nevertheless, most investors decided to stick to their bullish theses and their long-term focus allows us to profit from the recent declines. In particular, let’s take a look at what hedge funds think about Granite Point Mortgage Trust Inc. (NYSE:GPMT) in this article.

Hedge fund interest in Granite Point Mortgage Trust Inc. (NYSE:GPMT) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Ambac Financial Group, Inc. (NASDAQ:AMBC), HealthStream, Inc. (NASDAQ:HSTM), and Cass Information Systems (NASDAQ:CASS) to gather more data points.

If you'd ask most traders, hedge funds are seen as slow, old financial vehicles of years past. While there are more than 8000 funds in operation at present, We hone in on the bigwigs of this club, about 750 funds. Most estimates calculate that this group of people shepherd most of all hedge funds' total capital, and by paying attention to their highest performing picks, Insider Monkey has spotted a number of investment strategies that have historically outpaced the broader indices. Insider Monkey's flagship hedge fund strategy outpaced the S&P 500 index by nearly 5 percentage points per year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.

TUDOR INVESTMENT CORP

We're going to go over the latest hedge fund action regarding Granite Point Mortgage Trust Inc. (NYSE:GPMT).

How have hedgies been trading Granite Point Mortgage Trust Inc. (NYSE:GPMT)?

Heading into the first quarter of 2019, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards GPMT over the last 14 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

GPMT_may2019

The largest stake in Granite Point Mortgage Trust Inc. (NYSE:GPMT) was held by Clough Capital Partners, which reported holding $9 million worth of stock at the end of December. It was followed by D E Shaw with a $2.6 million position. Other investors bullish on the company included PEAK6 Capital Management, Tudor Investment Corp, and Renaissance Technologies.

Seeing as Granite Point Mortgage Trust Inc. (NYSE:GPMT) has faced declining sentiment from the aggregate hedge fund industry, we can see that there exists a select few hedgies who were dropping their positions entirely heading into Q3. Interestingly, Andrew Weiss's Weiss Asset Management cut the biggest position of the 700 funds tracked by Insider Monkey, comprising about $16.8 million in stock. Ken Griffin's fund, Citadel Investment Group, also said goodbye to its stock, about $15.4 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's also examine hedge fund activity in other stocks similar to Granite Point Mortgage Trust Inc. (NYSE:GPMT). We will take a look at Ambac Financial Group, Inc. (NASDAQ:AMBC), HealthStream, Inc. (NASDAQ:HSTM), Cass Information Systems (NASDAQ:CASS), and Triumph Bancorp Inc (NASDAQ:TBK). This group of stocks' market caps resemble GPMT's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AMBC,17,142221,-4 HSTM,14,48729,3 CASS,8,14771,1 TBK,6,59631,-1 Average,11.25,66338,-0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $66 million. That figure was $13 million in GPMT's case. Ambac Financial Group, Inc. (NASDAQ:AMBC) is the most popular stock in this table. On the other hand Triumph Bancorp Inc (NASDAQ:TBK) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Granite Point Mortgage Trust Inc. (NYSE:GPMT) is even less popular than TBK. Hedge funds dodged a bullet by taking a bearish stance towards GPMT. Our calculations showed that the top 15 most popular hedge fund stocks returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately GPMT wasn't nearly as popular as these 15 stock (hedge fund sentiment was very bearish); GPMT investors were disappointed as the stock returned 8.6% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.

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

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