Concerns over rising interest rates and expected further rate increases have hit several stocks hard during the fourth quarter of 2018. Trends reversed 180 degrees in 2019 amid Powell's pivot and optimistic expectations towards a trade deal with China. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were increasing their overall exposure in the third quarter and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards Guangshen Railway Co. Ltd (NYSE:GSH).
Guangshen Railway Co. Ltd (NYSE:GSH) has experienced an increase in enthusiasm from smart money of late. GSH was in 2 hedge funds' portfolios at the end of the third quarter of 2019. There was 1 hedge fund in our database with GSH holdings at the end of the previous quarter. Expectedly, our calculations also showed that GSH 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let's analyze the key hedge fund action regarding Guangshen Railway Co. Ltd (NYSE:GSH).
Hedge fund activity in Guangshen Railway Co. Ltd (NYSE:GSH)
At Q3's end, a total of 2 of the hedge funds tracked by Insider Monkey were long this stock, a change of 100% from the previous quarter. By comparison, 1 hedge fund held shares or bullish call options in GSH a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Guangshen Railway Co. Ltd (NYSE:GSH), which was worth $4.2 million at the end of the third quarter. On the second spot was Marshall Wace which amassed $0 million worth of shares.
As aggregate interest increased, key hedge funds were leading the bulls' herd. Marshall Wace, managed by Paul Marshall and Ian Wace, established the most valuable position in Guangshen Railway Co. Ltd (NYSE:GSH). Marshall Wace had $34 thousand invested in the company at the end of the quarter.
Let's check out hedge fund activity in other stocks similar to Guangshen Railway Co. Ltd (NYSE:GSH). These stocks are United Community Banks Inc (NASDAQ:UCBI), CRISPR Therapeutics AG (NASDAQ:CRSP), Fastly, Inc. (NYSE:FSLY), and The Hain Celestial Group, Inc. (NASDAQ:HAIN). This group of stocks' market valuations are closest to GSH's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UCBI,13,50527,1 CRSP,16,150251,3 FSLY,16,126686,3 HAIN,19,545805,2 Average,16,218317,2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $218 million. That figure was $4 million in GSH's case. The Hain Celestial Group, Inc. (NASDAQ:HAIN) is the most popular stock in this table. On the other hand United Community Banks Inc (NASDAQ:UCBI) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Guangshen Railway Co. Ltd (NYSE:GSH) is even less popular than UCBI. Hedge funds dodged a bullet by taking a bearish stance towards GSH. Our calculations showed that the top 20 most popular hedge fund stocks returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately GSH wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); GSH investors were disappointed as the stock returned -1.5% during the fourth quarter (through 11/22) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.