Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the first quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Gain Capital Holdings Inc (NYSE:GCAP) based on that data.
Is Gain Capital Holdings Inc (NYSE:GCAP) a buy right now? Money managers are getting more bullish. The number of long hedge fund bets went up by 4 in recent months. Our calculations also showed that GCAP 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). GCAP was in 14 hedge funds' portfolios at the end of March. There were 10 hedge funds in our database with GCAP positions at the end of the previous quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_731850" align="aligncenter" width="398"] Paul Glazer of Glazer Capital[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology's influence will go beyond online payments. So, we are checking out this futurist's moonshot opportunities in tech stocks. 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 analyze the key hedge fund action surrounding Gain Capital Holdings Inc (NYSE:GCAP).
How are hedge funds trading Gain Capital Holdings Inc (NYSE:GCAP)?
Heading into the second quarter of 2020, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 40% from one quarter earlier. By comparison, 11 hedge funds held shares or bullish call options in GCAP a year ago. With hedgies' sentiment swirling, there exists an "upper tier" of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Gain Capital Holdings Inc (NYSE:GCAP), with a stake worth $6.1 million reported as of the end of September. Trailing Renaissance Technologies was Beryl Capital Management, which amassed a stake valued at $2.3 million. GLG Partners, Private Capital Management, 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 AlphaOne Capital Partners allocated the biggest weight to Gain Capital Holdings Inc (NYSE:GCAP), around 0.75% of its 13F portfolio. Beryl Capital Management is also relatively very bullish on the stock, earmarking 0.49 percent of its 13F equity portfolio to GCAP.
As industrywide interest jumped, key hedge funds were leading the bulls' herd. Beryl Capital Management, managed by David Alexander Witkin, initiated the biggest position in Gain Capital Holdings Inc (NYSE:GCAP). Beryl Capital Management had $2.3 million invested in the company at the end of the quarter. Noam Gottesman's GLG Partners also made a $1.4 million investment in the stock during the quarter. The other funds with brand new GCAP positions are Gregg J. Powers's Private Capital Management, Gavin Saitowitz and Cisco J. del Valle's Springbok Capital, and Paul Glazer's Glazer Capital.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Gain Capital Holdings Inc (NYSE:GCAP) but similarly valued. We will take a look at Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX), Red Violet, Inc. (NASDAQ:RDVT), Stereotaxis Inc (NYSE:STXS), and Selecta Biosciences, Inc. (NASDAQ:SELB). All of these stocks' market caps are closest to GCAP's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LXRX,11,12887,0 RDVT,5,9917,-4 STXS,13,84564,2 SELB,21,94687,8 Average,12.5,50514,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $51 million. That figure was $15 million in GCAP's case. Selecta Biosciences, Inc. (NASDAQ:SELB) is the most popular stock in this table. On the other hand Red Violet, Inc. (NASDAQ:RDVT) is the least popular one with only 5 bullish hedge fund positions. Gain Capital Holdings Inc (NYSE:GCAP) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 but beat the market by 16.8 percentage points. Unfortunately GCAP wasn't nearly as popular as these 10 stocks and hedge funds that were betting on GCAP were disappointed as the stock returned 8.8% during the same time 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.