We are still in an overall bull market and many stocks that smart money investors were piling into surged through November 22nd. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 52% and 49% respectively. Hedge funds’ top 3 stock picks returned 39.1% this year and beat the S&P 500 ETFs by nearly 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Godaddy Inc (NYSE:GDDY).
Is Godaddy Inc (NYSE:GDDY) a sound investment now? The best stock pickers are becoming more confident. The number of bullish hedge fund bets increased by 4 lately. Our calculations also showed that GDDY isn’t among the 30 most popular stocks among hedge funds.
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Jay Petschek of Corsair Capital Management
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to go over the latest hedge fund action regarding Godaddy Inc (NYSE:GDDY).
What have hedge funds been doing with Godaddy Inc (NYSE:GDDY)?
Heading into the fourth quarter of 2019, a total of 48 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 9% from the previous quarter. On the other hand, there were a total of 48 hedge funds with a bullish position in GDDY a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
The largest stake in Godaddy Inc (NYSE:GDDY) was held by Select Equity Group, which reported holding $384.8 million worth of stock at the end of September. It was followed by 12 West Capital Management with a $253.2 million position. Other investors bullish on the company included Eminence Capital, Renaissance Technologies, and Marshall Wace. In terms of the portfolio weights assigned to each position Permian Investment Partners allocated the biggest weight to Godaddy Inc (NYSE:GDDY), around 24.45% of its portfolio. 12 West Capital Management is also relatively very bullish on the stock, designating 16.3 percent of its 13F equity portfolio to GDDY.
As aggregate interest increased, some big names were breaking ground themselves. Blue Harbour Group, managed by Clifton S. Robbins, established the most valuable position in Godaddy Inc (NYSE:GDDY). Blue Harbour Group had $81.2 million invested in the company at the end of the quarter. Dan Loeb’s Third Point also initiated a $33 million position during the quarter. The other funds with brand new GDDY positions are Eli Cohen’s Crescent Park Management, Jay Petschek and Steven Major’s Corsair Capital Management, and David Steinberg and Eric Udoff’s Marlowe Partners.
Let’s also examine hedge fund activity in other stocks similar to Godaddy Inc (NYSE:GDDY). We will take a look at iQIYI, Inc. (NASDAQ:IQ), Wheaton Precious Metals Corp. (NYSE:WPM), Teledyne Technologies Incorporated (NYSE:TDY), and EXACT Sciences Corporation (NASDAQ:EXAS). All of these stocks’ market caps match GDDY’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IQ | 22 | 966821 | 0 |
| WPM | 27 | 326903 | 8 |
| TDY | 29 | 686123 | 3 |
| EXAS | 35 | 586487 | 3 |
| Average | 28.25 | 641584 | 3.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.25 hedge funds with bullish positions and the average amount invested in these stocks was $642 million. That figure was $2545 million in GDDY’s case. EXACT Sciences Corporation (NASDAQ:EXAS) is the most popular stock in this table. On the other hand iQIYI, Inc. (NASDAQ:IQ) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks Godaddy Inc (NYSE:GDDY) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately GDDY wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on GDDY were disappointed as the stock returned 4.7% during the fourth quarter (through 11/22) 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
