While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and optimism towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the first quarter and hedging or reducing many of their long positions. However, as we know, big investors usually buy stocks with strong fundamentals, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Groupon Inc (NASDAQ:GRPN).
Is Groupon Inc (NASDAQ:GRPN) a superb investment today? The smart money is getting more optimistic. The number of bullish hedge fund bets rose by 2 lately. Our calculations also showed that GRPN isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let’s take a look at the latest hedge fund action regarding Groupon Inc (NASDAQ:GRPN).
How are hedge funds trading Groupon Inc (NASDAQ:GRPN)?
Heading into the second quarter of 2019, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GRPN over the last 15 quarters. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
More specifically, PAR Capital Management was the largest shareholder of Groupon Inc (NASDAQ:GRPN), with a stake worth $194 million reported as of the end of March. Trailing PAR Capital Management was P2 Capital Partners, which amassed a stake valued at $65.9 million. Maverick Capital, Ulysses Management, and D E Shaw were also very fond of the stock, giving the stock large weights in their portfolios.
As industrywide interest jumped, some big names were breaking ground themselves. Maverick Capital, managed by Lee Ainslie, established the most valuable position in Groupon Inc (NASDAQ:GRPN). Maverick Capital had $24.5 million invested in the company at the end of the quarter. Joshua Nash’s Ulysses Management also made a $22.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Matthew Hulsizer’s PEAK6 Capital Management, Israel Englander’s Millennium Management, and Michael Platt and William Reeves’s BlueCrest Capital Mgmt..
Let’s go over hedge fund activity in other stocks similar to Groupon Inc (NASDAQ:GRPN). These stocks are Avanos Medical, Inc. (NYSE:AVNS), BEST Inc. (NYSE:BEST), Four Corners Property Trust, Inc. (NYSE:FCPT), and Power Integrations Inc (NASDAQ:POWI). This group of stocks’ market values are closest to GRPN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AVNS | 11 | 40801 | -3 |
| BEST | 16 | 62721 | 7 |
| FCPT | 13 | 92837 | 0 |
| POWI | 6 | 79088 | 2 |
| Average | 11.5 | 68862 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $69 million. That figure was $406 million in GRPN’s case. BEST Inc. (NYSE:BEST) is the most popular stock in this table. On the other hand Power Integrations Inc (NASDAQ:POWI) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Groupon Inc (NASDAQ:GRPN) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately GRPN wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on GRPN were disappointed as the stock returned -1.4% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
