Due to lower-than-expected guidance for the third quarter, Glu Mobile Inc. (NASDAQ:GLUU)’s stock lost 19% at a point today, after reporting its second quarter performance after markets closed on Tuesday. Despite reporting non-GAAP revenue of $57.5 million, which increased 64% year-over-year, and a net profit of $0.01 per share, up from a loss of $0.02 posted a year earlier, the market reacted negatively to the forecast of $58 million to $60 million in revenues and loss per share range guidance between $0.02 to $0.00 for the third quarter that the firm announced. This is significantly under the consensus of $73 million in revenues and $0.04 earnings per share. Furthermore, the game maker also said that it is expecting EBITDA between -$1 million to $1 million, also below the consensus of $12 million.
Luis Louro / shutterstock.com
Notwithstanding the decline today, hedge funds were bullish on Glu Mobile Inc. (NASDAQ:GLUU) in the first three months of the year. We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular stock picks in real time since the end of August 2012. These stocks have returned 123.1% since then and outperformed the S&P500 Index by 66.5 percentage points (see more details here). That’s why we believe it is important to pay attention to hedge fund sentiment.
Insider trading is another area Insider Monkey looks at, precisely because this can give us an idea whether insiders are confident enough in their companies to acquire shares. Tencent Holdings, which has a chair on Glu Mobile Inc. (NASDAQ:GLUU)’s board, boosted its stake by 8.5 million shares on June 3. On the opposite side of the coin is President and Chief Executive Officer Niccolo de Masi, who sold 457,408 shares on June 1. Keeping these in mind, let’s take a look at the recent hedge fund activity involving Glu Mobile Inc.
How have hedgies been trading Glu Mobile Inc. (NASDAQ:GLUU)?
By the end of March, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, up by one from the fourth quarter of 2014. A more bullish signal for Glu Mobile Inc. (NASDAQ:GLUU), however, is the 108.41% quarterly increase in hedge funds’ holdings to $93.09 million at the end of March. The stock has only appreciated by 28.46% during the first quarter, which means that most of the increase in the aggregate value of holdings is due to hedge funds putting more capital in the stock. They were proven right in the second quarter with a 23.95% jump of the stock.
Anand Parekh’s Alyeska Investment Group had the biggest position in Glu Mobile Inc. (NASDAQ:GLUU) by the end of the first quarter with 3.98 million shares valued at about $19.9 million. D.E. Shaw & Co., L.P. managed by David E. Shaw, which held a $16.7 million position in 3.33 million shares came in second. Joseph A. Jolson’s Harvest Capital Strategies initiated the biggest position in Glu Mobile, which contained 1.55 million shares, while Neil Chriss’ Hutchin Hill Capital also acquired 392,900 shares.
The positive outlook of the world’s preeminent money managers makes us recommend a long position in Glu Mobile Inc. (NASDAQ:GLUU).
Disclosure: None
