It was a rough fourth quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 24.4% during the first 9 months of 2019 and outperformed the S&P 500 ETF by 4 percentage points. We are done processing the latest 13f filings and in this article we will study how hedge fund sentiment towards Globalstar, Inc. (NYSE:GSAT) changed during the first quarter.
Is Globalstar, Inc. (NYSE:GSAT) a buy here? Hedge funds are getting less bullish. The number of bullish hedge fund bets shrunk by 2 lately. Our calculations also showed that GSAT isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 40 percentage points since May 2014 through May 30, 2019 (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.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's check out the fresh hedge fund action regarding Globalstar, Inc. (NYSE:GSAT).
What does smart money think about Globalstar, Inc. (NYSE:GSAT)?
At Q2's end, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the first quarter of 2019. On the other hand, there were a total of 19 hedge funds with a bullish position in GSAT a year ago. With hedgies' capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Jason Mudrick's Mudrick Capital Management has the biggest position in Globalstar, Inc. (NYSE:GSAT), worth close to $55.4 million, accounting for 100% of its total 13F portfolio. On Mudrick Capital Management's heels is Warlander Asset Management, managed by Eric Cole, which holds a $20.6 million position; 9.3% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that are bullish comprise Michael Johnston's Steelhead Partners, Ari Zweiman's 683 Capital Partners and Kenneth Mario Garschina's Mason Capital Management.
Due to the fact that Globalstar, Inc. (NYSE:GSAT) has faced bearish sentiment from the smart money, it's easy to see that there were a few fund managers that elected to cut their full holdings by the end of the second quarter. Interestingly, Carl Tiedemann and Michael Tiedemann's TIG Advisors dropped the largest position of the "upper crust" of funds monitored by Insider Monkey, totaling an estimated $1.1 million in stock. Renaissance Technologies, also dumped its stock, about $0.3 million worth. These moves are important to note, as total hedge fund interest fell by 2 funds by the end of the second quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Globalstar, Inc. (NYSE:GSAT) but similarly valued. We will take a look at National Presto Industries Inc. (NYSE:NPK), Ready Capital Corporation (NYSE:RC), Uxin Limited (NASDAQ:UXIN), and Tucows Inc. (NASDAQ:TCX). This group of stocks' market valuations are similar to GSAT's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NPK,12,71041,-1 RC,6,46073,-8 UXIN,3,24561,-4 TCX,8,49968,-2 Average,7.25,47911,-3.75 [/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 $48 million. That figure was $113 million in GSAT's case. National Presto Industries Inc. (NYSE:NPK) is the most popular stock in this table. On the other hand Uxin Limited (NASDAQ:UXIN) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Globalstar, Inc. (NYSE:GSAT) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately GSAT wasn't nearly as popular as these 20 stocks and hedge funds that were betting on GSAT were disappointed as the stock returned -14.6% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.