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Hedge fund managers like David Einhorn, Bill Ackman, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Gulf Island Fabrication, Inc. (NASDAQ:GIFI).
Gulf Island Fabrication, Inc. (NASDAQ:GIFI) has experienced an increase in activity from the world's largest hedge funds lately. GIFI was in 11 hedge funds' portfolios at the end of March. There were 9 hedge funds in our database with GIFI holdings at the end of the previous quarter. Our calculations also showed that GIFI isn't among the 30 most popular stocks among hedge funds.
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 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.
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Paul Marshall of Marshall Wace[/caption]
Let's go over the fresh hedge fund action encompassing Gulf Island Fabrication, Inc. (NASDAQ:GIFI).
How are hedge funds trading Gulf Island Fabrication, Inc. (NASDAQ:GIFI)?
At Q1's end, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 22% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards GIFI over the last 15 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.
The largest stake in Gulf Island Fabrication, Inc. (NASDAQ:GIFI) was held by Kokino LLC, which reported holding $13.8 million worth of stock at the end of March. It was followed by Ariel Investments with a $3.4 million position. Other investors bullish on the company included Royce & Associates, Prescott Group Capital Management, and Ancora Advisors.
As aggregate interest increased, some big names were breaking ground themselves. ExodusPoint Capital, managed by Michael Gelband, created the most valuable position in Gulf Island Fabrication, Inc. (NASDAQ:GIFI). ExodusPoint Capital had $0.2 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace LLP also made a $0.1 million investment in the stock during the quarter.
Let's check out hedge fund activity in other stocks similar to Gulf Island Fabrication, Inc. (NASDAQ:GIFI). These stocks are StealthGas Inc. (NASDAQ:GASS), Intevac, Inc. (NASDAQ:IVAC), StoneCastle Financial Corp (NASDAQ:BANX), and Erytech Pharma S.A. (NASDAQ:ERYP). All of these stocks' market caps are closest to GIFI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GASS,6,54751,0 IVAC,10,23583,4 BANX,1,869,0 ERYP,2,4922,0 Average,4.75,21031,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.75 hedge funds with bullish positions and the average amount invested in these stocks was $21 million. That figure was $27 million in GIFI's case. Intevac, Inc. (NASDAQ:IVAC) is the most popular stock in this table. On the other hand StoneCastle Financial Corp (NASDAQ:BANX) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Gulf Island Fabrication, Inc. (NASDAQ:GIFI) 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. Unfortunately GIFI wasn't nearly as popular as these 20 stocks and hedge funds that were betting on GIFI were disappointed as the stock returned -19% during the same 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 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
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