How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Gilat Satellite Networks Ltd. (NASDAQ:GILT) and determine whether hedge funds had an edge regarding this stock.
Gilat Satellite Networks Ltd. (NASDAQ:GILT) has seen an increase in support from the world's most elite money managers lately. Our calculations also showed that GILT isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are dozens of methods stock market investors put to use to value publicly traded companies. A couple of the most under-the-radar methods are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the top investment managers can outperform their index-focused peers by a solid margin (see the details here).
[caption id="attachment_731850" align="aligncenter" width="392"] Paul Glazer of Glazer Capital[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 10 most profitable companies in the world to identify emerging companies that are likely to deliver 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we're going to take a peek at the latest hedge fund action encompassing Gilat Satellite Networks Ltd. (NASDAQ:GILT).
What does smart money think about Gilat Satellite Networks Ltd. (NASDAQ:GILT)?
At Q1's end, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 550% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in GILT over the last 18 quarters. With hedge funds' sentiment swirling, there exists a few notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Gilat Satellite Networks Ltd. (NASDAQ:GILT), with a stake worth $21.7 million reported as of the end of September. Trailing Renaissance Technologies was Alpine Associates, which amassed a stake valued at $11.9 million. Water Island Capital, GLG Partners, and Springbok Capital 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 Alpine Associates allocated the biggest weight to Gilat Satellite Networks Ltd. (NASDAQ:GILT), around 0.47% of its 13F portfolio. Water Island Capital is also relatively very bullish on the stock, setting aside 0.47 percent of its 13F equity portfolio to GILT.
As one would reasonably expect, specific money managers were leading the bulls' herd. Alpine Associates, managed by Robert Emil Zoellner, assembled the most outsized position in Gilat Satellite Networks Ltd. (NASDAQ:GILT). Alpine Associates had $11.9 million invested in the company at the end of the quarter. John Orrico's Water Island Capital also made a $6.5 million investment in the stock during the quarter. The following funds were also among the new GILT investors: Noam Gottesman's GLG Partners, Gavin Saitowitz and Cisco J. del Valle's Springbok Capital, and Paul Glazer's Glazer Capital.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Gilat Satellite Networks Ltd. (NASDAQ:GILT) but similarly valued. These stocks are Mechel PAO (NYSE:MTL), Vapotherm, Inc. (NYSE:VAPO), Magic Software Enterprises Ltd. (NASDAQ:MGIC), and Agenus Inc (NASDAQ:AGEN). This group of stocks' market values are similar to GILT's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MTL,3,1432,1 VAPO,12,100026,2 MGIC,3,4732,0 AGEN,11,45308,0 Average,7.25,37875,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $38 million. That figure was $50 million in GILT's case. Vapotherm, Inc. (NYSE:VAPO) is the most popular stock in this table. On the other hand Mechel PAO (NYSE:MTL) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Gilat Satellite Networks Ltd. (NASDAQ:GILT) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th and still beat the market by 16.8 percentage points. Unfortunately GILT wasn't nearly as popular as these 10 stocks and hedge funds that were betting on GILT were disappointed as the stock returned -14% during the second quarter (through June 25th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.