Is Gores Holdings II, Inc. (NASDAQ:GSHT) a good bet right now? We like to analyze hedge fund sentiment before doing days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy league graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Gores Holdings II, Inc. (NASDAQ:GSHT) investors should be aware of an increase in support from the world's most elite money managers recently. Our calculations also showed that GSHT isn't among the 30 most popular stocks among hedge funds.
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 market by 18 percentage points since May 2014 through December 3, 2018 (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 our short portfolio.
We're going to review the latest hedge fund action surrounding Gores Holdings II, Inc. (NASDAQ:GSHT).
How are hedge funds trading Gores Holdings II, Inc. (NASDAQ:GSHT)?
Heading into the fourth quarter of 2018, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the previous quarter. The graph below displays the number of hedge funds with bullish position in GSHT over the last 13 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Governors Lane, managed by Isaac Corre, holds the largest position in Gores Holdings II, Inc. (NASDAQ:GSHT). Governors Lane has a $26.6 million position in the stock, comprising 1.5% of its 13F portfolio. The second most bullish fund manager is Highbridge Capital Management, managed by Glenn Russell Dubin, which holds a $23.1 million position; 0.5% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors with similar optimism include Nick Niell's Arrowgrass Capital Partners, Jeffrey Jacobowitz's Simcoe Capital Management and Michael Platt and William Reeves's BlueCrest Capital Mgmt..
Now, key hedge funds were leading the bulls' herd. Simcoe Capital Management, managed by Jeffrey Jacobowitz, initiated the biggest position in Gores Holdings II, Inc. (NASDAQ:GSHT). Simcoe Capital Management had $19.6 million invested in the company at the end of the quarter. Amy Minella's Cardinal Capital also initiated a $14.7 million position during the quarter. The other funds with new positions in the stock are Sander Gerber's Hudson Bay Capital Management, Sander Gerber's Hudson Bay Capital Management, and Jeffrey Jacobowitz's Simcoe Capital Management.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Gores Holdings II, Inc. (NASDAQ:GSHT) but similarly valued. We will take a look at Independence Holding Company (NYSE:IHC), NanoString Technologies Inc (NASDAQ:NSTG), Noodles & Co (NASDAQ:NDLS), and Progenics Pharmaceuticals, Inc. (NASDAQ:PGNX). All of these stocks' market caps resemble GSHT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IHC,4,15381,0 NSTG,16,120272,5 NDLS,14,54057,3 PGNX,12,114685,-1 Average,11.5,76099,1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $76 million. That figure was $178 million in GSHT's case. NanoString Technologies Inc (NASDAQ:NSTG) is the most popular stock in this table. On the other hand Independence Holding Company (NYSE:IHC) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Gores Holdings II, Inc. (NASDAQ:GSHT) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.