We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Godaddy Inc (NYSE:GDDY).
Is Godaddy Inc (NYSE:GDDY) a cheap investment now? The smart money was cutting their exposure. The number of bullish hedge fund positions retreated by 5 in recent months. Godaddy Inc (NYSE:GDDY) was in 39 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 55. Our calculations also showed that GDDY isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ricky Sandler of Eminence Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. Keeping this in mind let’s take a glance at the recent hedge fund action regarding Godaddy Inc (NYSE:GDDY).
Do Hedge Funds Think GDDY Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 39 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in GDDY over the last 23 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Robert Joseph Caruso’s Select Equity Group has the number one position in Godaddy Inc (NYSE:GDDY), worth close to $913.9 million, accounting for 3.3% of its total 13F portfolio. The second largest stake is held by BlueSpruce Investments, managed by Tim Hurd and Ed Magnus, which holds a $321.9 million position; the fund has 6.4% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions contain Mitch Kuflik and Rob Sobel’s Brahman Capital, Alexis Fortune’s Blacksheep Fund Management and Ricky Sandler’s Eminence Capital. In terms of the portfolio weights assigned to each position Blacksheep Fund Management allocated the biggest weight to Godaddy Inc (NYSE:GDDY), around 25.2% of its 13F portfolio. Brahman Capital is also relatively very bullish on the stock, earmarking 13.64 percent of its 13F equity portfolio to GDDY.
Because Godaddy Inc (NYSE:GDDY) has faced declining sentiment from the smart money, it’s safe to say that there is a sect of hedgies who sold off their positions entirely last quarter. It’s worth mentioning that Yen Liow’s Aravt Global said goodbye to the largest position of all the hedgies monitored by Insider Monkey, comprising close to $33.4 million in stock. Alexander Mitchell’s fund, Scopus Asset Management, also sold off its stock, about $24.9 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 5 funds last quarter.
Let’s go over hedge fund activity in other stocks similar to Godaddy Inc (NYSE:GDDY). These stocks are Korea Electric Power Corporation (NYSE:KEP), iQIYI, Inc. (NASDAQ:IQ), Crown Holdings, Inc. (NYSE:CCK), Oak Street Health, Inc. (NYSE:OSH), Carlyle Group Inc (NASDAQ:CG), UDR, Inc. (NYSE:UDR), and Open Text Corporation (NASDAQ:OTEX). This group of stocks’ market caps are similar to GDDY’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KEP | 4 | 19253 | -3 |
| IQ | 40 | 1361640 | 10 |
| CCK | 60 | 2028362 | -3 |
| OSH | 31 | 602957 | -3 |
| CG | 26 | 506255 | 5 |
| UDR | 30 | 312293 | 7 |
| OTEX | 16 | 215690 | -2 |
| Average | 29.6 | 720921 | 1.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.6 hedge funds with bullish positions and the average amount invested in these stocks was $721 million. That figure was $2367 million in GDDY’s case. Crown Holdings, Inc. (NYSE:CCK) is the most popular stock in this table. On the other hand Korea Electric Power Corporation (NYSE:KEP) is the least popular one with only 4 bullish hedge fund positions. Godaddy Inc (NYSE:GDDY) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GDDY is 52.5. 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 19.3% in 2021 through June 25th and still beat the market by 4.8 percentage points. Hedge funds were also right about betting on GDDY, though not to the same extent, as the stock returned 11.9% since Q1 (through June 25th) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.
