Hedge Funds Are Done Selling Godaddy Inc (GDDY)

We at Insider Monkey have gone over 873 13F filings that hedge funds and prominent investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th. In this article, we look at what those funds think of Godaddy Inc (NYSE:GDDY) based on that data.

Godaddy Inc (NYSE:GDDY) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 39 hedge funds’ portfolios at the end of June. Our calculations also showed that GDDY isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). At the end of this article we will also compare GDDY to other stocks including Citrix Systems, Inc. (NASDAQ:CTXS), UDR, Inc. (NYSE:UDR), and Fair Isaac Corporation (NYSE:FICO) to get a better sense of its popularity.

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 79 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.

Michael Lowenstein of Kensico Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. We go through lists like the 10 best EV 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 we’re going to analyze the latest hedge fund action encompassing Godaddy Inc (NYSE:GDDY).

Do Hedge Funds Think GDDY Is A Good Stock To Buy Now?

At Q2’s end, a total of 39 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 55 hedge funds with a bullish position in GDDY a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Select Equity Group, managed by Robert Joseph Caruso, holds the largest position in Godaddy Inc (NYSE:GDDY). Select Equity Group has a $1.0231 billion position in the stock, comprising 3.5% of its 13F portfolio. The second most bullish fund manager is BlueSpruce Investments, led by Tim Hurd and Ed Magnus, holding a $484.9 million position; the fund has 8.8% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism consist of Mitch Kuflik and Rob Sobel’s Brahman Capital, Alexis Fortune’s Blacksheep Fund Management and Michael Kahan and Jeremy Kahan’s North Peak Capital. In terms of the portfolio weights assigned to each position North Peak Capital allocated the biggest weight to Godaddy Inc (NYSE:GDDY), around 30.33% of its 13F portfolio. Blacksheep Fund Management is also relatively very bullish on the stock, dishing out 22.64 percent of its 13F equity portfolio to GDDY.

Because Godaddy Inc (NYSE:GDDY) has faced falling interest from hedge fund managers, it’s easy to see that there lies a certain “tier” of fund managers who were dropping their positions entirely heading into Q3. Intriguingly, Ken Griffin’s Citadel Investment Group dropped the largest position of the “upper crust” of funds followed by Insider Monkey, valued at about $73.7 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund dumped about $45.9 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks similar to Godaddy Inc (NYSE:GDDY). These stocks are Citrix Systems, Inc. (NASDAQ:CTXS), UDR, Inc. (NYSE:UDR), Fair Isaac Corporation (NYSE:FICO), Apollo Global Management Inc (NYSE:APO), Shaw Communications Inc (NYSE:SJR), News Corp (NASDAQ:NWS), and Loews Corporation (NYSE:L). This group of stocks’ market valuations match GDDY’s market valuation.

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As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $836 million. That figure was $2769 million in GDDY’s case. Apollo Global Management Inc (NYSE:APO) is the most popular stock in this table. On the other hand News Corp (NASDAQ:NWS) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Godaddy Inc (NYSE:GDDY) is more popular among hedge funds. Our overall hedge fund sentiment score for GDDY is 76.3. 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 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 21.8% in 2021 through October 11th and still beat the market by 4.4 percentage points. Unfortunately GDDY wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on GDDY were disappointed as the stock returned -21.4% since the end of the second quarter (through 10/11) 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 most of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.