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Hedge Fund Sentiment Is Stagnant On GulfMark Offshore, Inc. (GLF)

Al Green

"October lived up to its scary reputation—the S&P 500 falling in the month by the largest amount in the last 40 years, the only worse Octobers being '08 and the Crash of '87. For perspective, there have been only 5 occasions in those 40 years when the S&P 500 declined by greater than 20% from peak to trough. Other than the '87 Crash, all were during recessions. There were 17 other instances, over the same time frame, when the market fell by over 10% but less than 20%. Furthermore, this is the 18th correction of 5% or more since the current bull market started in March '09. Corrections are the norm. They can be healthy as they often undo market complacency—overbought levels—potentially allowing the market to base and move even higher." This is how Trapeze Asset Management summarized the recent market moves in its investor letter. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards one of the stocks hedge funds invest in.

GulfMark Offshore, Inc. (NYSE:GLF) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 6 hedge funds' portfolios at the end of September. 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 Inseego Corp. (NASDAQ:INSG), LSB Industries, Inc. (NYSE:LXU), and MannKind Corporation (NASDAQ:MNKD) to gather more data points.

To most investors, hedge funds are viewed as underperforming, old financial tools of the past. While there are greater than 8,000 funds with their doors open at the moment, We look at the masters of this group, around 700 funds. These money managers handle the lion's share of the smart money's total asset base, and by shadowing their first-class investments, Insider Monkey has figured out a few investment strategies that have historically outperformed Mr. Market. Insider Monkey's flagship hedge fund strategy outstripped the S&P 500 index by 6 percentage points a 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 24% since February 2017 (through December 3rd) even though the market was up nearly 23% during the same period. We just shared a list of 11 short targets in our latest quarterly update.

[caption id="attachment_324853" align="aligncenter" width="450"] Joshua Friedman of Canyon Capital[/caption]

Josh Friedman Canyon Capital

Let's take a look at the new hedge fund action encompassing GulfMark Offshore, Inc. (NYSE:GLF).

How are hedge funds trading GulfMark Offshore, Inc. (NYSE:GLF)?

Heading into the fourth quarter of 2018, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, no change from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in GLF over the last 13 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds GLF Positions

The largest stake in GulfMark Offshore, Inc. (NYSE:GLF) was held by Raging Capital Management, which reported holding $82 million worth of stock at the end of September. It was followed by Canyon Capital Advisors with a $22.4 million position. Other investors bullish on the company included QVT Financial, Concourse Capital Management, and Springbok Capital.

Seeing as GulfMark Offshore, Inc. (NYSE:GLF) has faced a decline in interest from the aggregate hedge fund industry, logic holds that there lies a certain "tier" of money managers who were dropping their positions entirely last quarter. Intriguingly, Charles Frumberg's Emancipation Capital dropped the largest position of the "upper crust" of funds monitored by Insider Monkey, comprising an estimated $2 million in stock. Israel Englander's fund, Millennium Management, also cut its stock, about $0.2 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's now review hedge fund activity in other stocks similar to GulfMark Offshore, Inc. (NYSE:GLF). These stocks are Inseego Corp. (NASDAQ:INSG), LSB Industries, Inc. (NYSE:LXU), MannKind Corporation (NASDAQ:MNKD), and Napco Security Technologies Inc (NASDAQ:NSSC). This group of stocks' market caps are closest to GLF's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position INSG,8,6851,6 LXU,6,31711,2 MNKD,7,7517,-3 NSSC,5,6487,3 Average,6.5,13142,2 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $13 million. That figure was $116 million in GLF's case. Inseego Corp. (NASDAQ:INSG) is the most popular stock in this table. On the other hand Napco Security Technologies Inc (NASDAQ:NSSC) is the least popular one with only 5 bullish hedge fund positions. GulfMark Offshore, Inc. (NYSE:GLF) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. In this regard INSG might be a better candidate to consider a long position.

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

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