Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Ferroglobe PLC (NASDAQ:GSM).
Is GSM a good stock to buy now? The best stock pickers were taking a pessimistic view. The number of bullish hedge fund positions were trimmed by 2 in recent months. Ferroglobe PLC (NASDAQ:GSM) was in 9 hedge funds' portfolios at the end of September. The all time high for this statistics is 23. Our calculations also showed that GSM isn't among the 30 most popular stocks among hedge funds (click for Q3 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 66 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.
Donald Sussman Paloma Partners
Donald Sussman of Paloma Partners
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let's take a peek at the latest hedge fund action encompassing Ferroglobe PLC (NASDAQ:GSM).
Do Hedge Funds Think GSM Is A Good Stock To Buy Now?
At third quarter's end, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from the previous quarter. On the other hand, there were a total of 10 hedge funds with a bullish position in GSM a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Adage Capital Management, managed by Phill Gross and Robert Atchinson, holds the most valuable position in Ferroglobe PLC (NASDAQ:GSM). Adage Capital Management has a $5.2 million position in the stock, comprising less than 0.1%% of its 13F portfolio. On Adage Capital Management's heels is Hosking Partners, managed by Jeremy Hosking, which holds a $2.5 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish comprise Renaissance Technologies, Chuck Royce's Royce & Associates and John Overdeck and David Siegel's Two Sigma Advisors. In terms of the portfolio weights assigned to each position Hosking Partners allocated the biggest weight to Ferroglobe PLC (NASDAQ:GSM), around 0.08% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, dishing out 0.02 percent of its 13F equity portfolio to GSM.
Seeing as Ferroglobe PLC (NASDAQ:GSM) has faced falling interest from the aggregate hedge fund industry, logic holds that there lies a certain "tier" of funds that slashed their entire stakes in the third quarter. At the top of the heap, Adam Usdan's Trellus Management Company cut the largest stake of the 750 funds followed by Insider Monkey, comprising an estimated $0 million in stock. Ken Griffin's fund, Citadel Investment Group, also cut its stock, about $0 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 2 funds in the third quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Ferroglobe PLC (NASDAQ:GSM) but similarly valued. These stocks are MTBC, Inc. (NASDAQ:MTBC), StealthGas Inc. (NASDAQ:GASS), Corvus Pharmaceuticals, Inc. (NASDAQ:CRVS), PRGX Global Inc (NASDAQ:PRGX), Intrepid Potash, Inc. (NYSE:IPI), Identiv, Inc. (NASDAQ:INVE), and Bankwell Financial Group, Inc. (NASDAQ:BWFG). All of these stocks' market caps are closest to GSM's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MTBC,4,7636,-2 GASS,5,44165,0 CRVS,7,52499,-2 PRGX,9,38796,-1 IPI,7,3023,-1 INVE,8,12583,6 BWFG,6,24188,0 Average,6.6,26127,0 [/table]
As you can see these stocks had an average of 6.6 hedge funds with bullish positions and the average amount invested in these stocks was $26 million. That figure was $12 million in GSM's case. PRGX Global Inc (NASDAQ:PRGX) is the most popular stock in this table. On the other hand MTBC, Inc. (NASDAQ:MTBC) is the least popular one with only 4 bullish hedge fund positions. Ferroglobe PLC (NASDAQ:GSM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GSM is 64.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on GSM as the stock returned 165.7% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Get real-time email alerts: Follow Ferroglobe Plc (NASDAQ:GSM)
Disclosure: None. This article was originally published at Insider Monkey.
