How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Goosehead Insurance, Inc. (NASDAQ:GSHD).
Goosehead Insurance, Inc. (NASDAQ:GSHD) investors should pay attention to an increase in support from the world’s most elite money managers in recent months. Goosehead Insurance, Inc. (NASDAQ:GSHD) was in 24 hedge funds’ portfolios at the end of March. The all time high for this statistic was previously 22. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 21 hedge funds in our database with GSHD holdings at the end of December. Our calculations also showed that GSHD isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
In today’s marketplace there are many methods stock market investors use to assess stocks. Two of the less utilized methods are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the best fund managers can beat the broader indices by a significant margin (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .
Charles Akre of Akre Capital Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let’s take a look at the fresh hedge fund action surrounding Goosehead Insurance, Inc. (NASDAQ:GSHD).
Do Hedge Funds Think GSHD Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from the fourth quarter of 2020. By comparison, 11 hedge funds held shares or bullish call options in GSHD a year ago. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Zevenbergen Capital Investments, managed by Nancy Zevenbergen, holds the number one position in Goosehead Insurance, Inc. (NASDAQ:GSHD). Zevenbergen Capital Investments has a $35.7 million position in the stock, comprising 0.7% of its 13F portfolio. Coming in second is Leonard A. Potter of Wildcat Capital Management, with a $26.5 million position; 3.2% of its 13F portfolio is allocated to the company. Other members of the smart money that are bullish comprise Charles Akre’s Akre Capital Management, Richard Driehaus’s Driehaus Capital and Philip Timon’s Owls Nest Partners. In terms of the portfolio weights assigned to each position Owls Nest Partners allocated the biggest weight to Goosehead Insurance, Inc. (NASDAQ:GSHD), around 9.22% of its 13F portfolio. Highside Global Management is also relatively very bullish on the stock, earmarking 3.3 percent of its 13F equity portfolio to GSHD.
Consequently, specific money managers were leading the bulls’ herd. Tudor Investment Corp, managed by Paul Tudor Jones, initiated the largest position in Goosehead Insurance, Inc. (NASDAQ:GSHD). Tudor Investment Corp had $1.7 million invested in the company at the end of the quarter. Daniel Johnson’s Gillson Capital also initiated a $1.1 million position during the quarter. The other funds with new positions in the stock are D. E. Shaw’s D E Shaw, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, and Jinghua Yan’s TwinBeech Capital.
Let’s now review hedge fund activity in other stocks similar to Goosehead Insurance, Inc. (NASDAQ:GSHD). We will take a look at The Brink’s Company (NYSE:BCO), Southwest Gas Holdings, Inc. (NYSE:SWX), Colliers International Group Inc (NASDAQ:CIGI), AllianceBernstein Holding LP (NYSE:AB), Rapid7 Inc (NASDAQ:RPD), Switch, Inc. (NYSE:SWCH), and Carter’s, Inc. (NYSE:CRI). All of these stocks’ market caps are similar to GSHD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BCO | 24 | 406832 | -2 |
| SWX | 23 | 159735 | 6 |
| CIGI | 14 | 866464 | 3 |
| AB | 8 | 40384 | -1 |
| RPD | 25 | 151718 | 4 |
| SWCH | 10 | 187483 | -8 |
| CRI | 27 | 265128 | 2 |
| Average | 18.7 | 296821 | 0.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.7 hedge funds with bullish positions and the average amount invested in these stocks was $297 million. That figure was $162 million in GSHD’s case. Carter’s, Inc. (NYSE:CRI) is the most popular stock in this table. On the other hand AllianceBernstein Holding LP (NYSE:AB) is the least popular one with only 8 bullish hedge fund positions. Goosehead Insurance, Inc. (NASDAQ:GSHD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GSHD is 80.1. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately GSHD wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on GSHD were disappointed as the stock returned 7.8% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow Goosehead Insurance Inc. (NASDAQ:GSHD)
Follow Goosehead Insurance Inc. (NASDAQ:GSHD)
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Disclosure: None. This article was originally published at Insider Monkey.
