Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards GoPro Inc (NASDAQ:GPRO).
Is GoPro Inc (NASDAQ:GPRO) a superb stock to buy now? The best stock pickers were turning less bullish. The number of long hedge fund bets fell by 8 in recent months. GoPro Inc (NASDAQ:GPRO) was in 28 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 36. Our calculations also showed that GPRO isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 36 hedge funds in our database with GPRO holdings at the end of March.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
David Einhorn of Greenlight 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 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. Now we’re going to check out the recent hedge fund action regarding GoPro Inc (NASDAQ:GPRO).
Do Hedge Funds Think GPRO Is A Good Stock To Buy Now?
At second quarter’s end, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of -22% from the first quarter of 2020. By comparison, 10 hedge funds held shares or bullish call options in GPRO a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, David Cohen and Harold Levy’s Iridian Asset Management has the biggest position in GoPro Inc (NASDAQ:GPRO), worth close to $79 million, accounting for 1.4% of its total 13F portfolio. Coming in second is Prentice Capital Management, managed by Michael Zimmerman, which holds a $74 million position; the fund has 17.7% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism contain D. E. Shaw’s D E Shaw, David Einhorn’s Greenlight Capital and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Prentice Capital Management allocated the biggest weight to GoPro Inc (NASDAQ:GPRO), around 17.67% of its 13F portfolio. SG Capital Management is also relatively very bullish on the stock, setting aside 3.06 percent of its 13F equity portfolio to GPRO.
Judging by the fact that GoPro Inc (NASDAQ:GPRO) has experienced falling interest from the smart money, it’s safe to say that there is a sect of funds who sold off their positions entirely last quarter. Intriguingly, Cynthia Paul’s Lynrock Lake said goodbye to the biggest investment of all the hedgies tracked by Insider Monkey, worth an estimated $13.9 million in stock, and Sander Gerber’s Hudson Bay Capital Management was right behind this move, as the fund dropped about $10.6 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 8 funds last quarter.
Let’s go over hedge fund activity in other stocks similar to GoPro Inc (NASDAQ:GPRO). We will take a look at Provident Financial Services, Inc. (NYSE:PFS), The Bank of N.T. Butterfield & Son Limited (NYSE:NTB), Ferro Corporation (NYSE:FOE), Cohu, Inc. (NASDAQ:COHU), Eventbrite, Inc. (NYSE:EB), Frontline Ltd (NYSE:FRO), and Lithium Americas Corp. (NYSE:LAC). This group of stocks’ market valuations are similar to GPRO’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PFS | 7 | 11027 | -4 |
| NTB | 17 | 83178 | 0 |
| FOE | 23 | 388379 | 11 |
| COHU | 15 | 90535 | -10 |
| EB | 25 | 298637 | 1 |
| FRO | 13 | 26574 | 3 |
| LAC | 9 | 31872 | -1 |
| Average | 15.6 | 132886 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.6 hedge funds with bullish positions and the average amount invested in these stocks was $133 million. That figure was $414 million in GPRO’s case. Eventbrite, Inc. (NYSE:EB) is the most popular stock in this table. On the other hand Provident Financial Services, Inc. (NYSE:PFS) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks GoPro Inc (NASDAQ:GPRO) is more popular among hedge funds. Our overall hedge fund sentiment score for GPRO is 70.3. 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 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. Unfortunately GPRO wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on GPRO were disappointed as the stock returned -24.2% since the end of the second quarter (through 10/15) 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.
