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Hedge Funds Nibbling On Garrison Capital Inc (GARS)

·6 min read

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of Garrison Capital Inc (NASDAQ:GARS).

Garrison Capital Inc (NASDAQ:GARS) shareholders have witnessed an increase in activity from the world's largest hedge funds in recent months. GARS was in 5 hedge funds' portfolios at the end of the first quarter of 2020. There were 4 hedge funds in our database with GARS positions at the end of the previous quarter. Our calculations also showed that GARS 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.

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 S&P 500 ETFs by 51 percentage points since March 2017 (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.

[caption id="attachment_341290" align="aligncenter" width="399"]

Phillip Goldstein of Bulldog Investors[/caption]

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020's unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we're going to view the fresh hedge fund action encompassing Garrison Capital Inc (NASDAQ:GARS).

What have hedge funds been doing with Garrison Capital Inc (NASDAQ:GARS)?

At Q1's end, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GARS over the last 18 quarters. With the smart money's capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

More specifically, Bulldog Investors was the largest shareholder of Garrison Capital Inc (NASDAQ:GARS), with a stake worth $1.1 million reported as of the end of September. Trailing Bulldog Investors was Almitas Capital, which amassed a stake valued at $0.3 million. Mariner Investment Group, Royce & Associates, and Two Sigma Advisors 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 Almitas Capital allocated the biggest weight to Garrison Capital Inc (NASDAQ:GARS), around 0.76% of its 13F portfolio. Mariner Investment Group is also relatively very bullish on the stock, setting aside 0.6 percent of its 13F equity portfolio to GARS.

As aggregate interest increased, specific money managers were leading the bulls' herd. Mariner Investment Group, managed by William Michaelcheck, established the most valuable position in Garrison Capital Inc (NASDAQ:GARS). Mariner Investment Group had $0.2 million invested in the company at the end of the quarter.

Let's go over hedge fund activity in other stocks similar to Garrison Capital Inc (NASDAQ:GARS). We will take a look at Unico American Corporation (NASDAQ:UNAM), CPI Aerostructures, Inc. (NYSE:CVU), Celsion Corporation (NASDAQ:CLSN), and Aqua Metals, Inc. (NASDAQ:AQMS). This group of stocks' market caps are similar to GARS's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UNAM,1,110,0 CVU,3,2505,-2 CLSN,1,142,-2 AQMS,1,9,-1 Average,1.5,692,-1.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 1.5 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $2 million in GARS's case. CPI Aerostructures, Inc. (NYSE:CVU) is the most popular stock in this table. On the other hand Unico American Corporation (NASDAQ:UNAM) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Garrison Capital Inc (NASDAQ:GARS) 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 returned 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on GARS as the stock returned 97.6% so far in Q2 (through the end of May) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

[company-follow-email id=1509892][/company-follow-email]

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

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