How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Global Payments Inc (NYSE:GPN).
Global Payments Inc (NYSE:GPN) investors should be aware of an increase in enthusiasm from smart money in recent months. Our calculations also showed that GPN isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
If you’d ask most market participants, hedge funds are assumed to be worthless, old investment tools of yesteryear. While there are more than 8000 funds in operation at present, Our experts look at the masters of this club, about 750 funds. It is estimated that this group of investors control most of all hedge funds’ total capital, and by tracking their finest stock picks, Insider Monkey has spotted numerous investment strategies that have historically outpaced the S&P 500 index. Insider Monkey’s flagship hedge fund strategy surpassed the S&P 500 index by around 5 percentage points per year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s analyze the fresh hedge fund action encompassing Global Payments Inc (NYSE:GPN).
How are hedge funds trading Global Payments Inc (NYSE:GPN)?
At Q2’s end, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 28% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in GPN over the last 16 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Coatue Management held the most valuable stake in Global Payments Inc (NYSE:GPN), which was worth $297.1 million at the end of the second quarter. On the second spot was Point72 Asset Management which amassed $169.6 million worth of shares. Moreover, Alkeon Capital Management, Hitchwood Capital Management, and Polar Capital were also bullish on Global Payments Inc (NYSE:GPN), allocating a large percentage of their portfolios to this stock.
With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Coatue Management, managed by Philippe Laffont, assembled the biggest position in Global Payments Inc (NYSE:GPN). Coatue Management had $297.1 million invested in the company at the end of the quarter. James Crichton’s Hitchwood Capital Management also initiated a $80.1 million position during the quarter. The following funds were also among the new GPN investors: Robert Pohly’s Samlyn Capital, Robert Boucai’s Newbrook Capital Advisors, and Robert Pitts’s Steadfast Capital Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Global Payments Inc (NYSE:GPN) but similarly valued. These stocks are McKesson Corporation (NYSE:MCK), BT Group plc (NYSE:BT), Willis Towers Watson Public Limited Company (NASDAQ:WLTW), and Royal Caribbean Cruises Ltd. (NYSE:RCL). This group of stocks’ market values are similar to GPN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MCK | 36 | 2070783 | 4 |
| BT | 12 | 83150 | -2 |
| WLTW | 33 | 1693637 | 0 |
| RCL | 46 | 1329751 | -1 |
| Average | 31.75 | 1294330 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.75 hedge funds with bullish positions and the average amount invested in these stocks was $1294 million. That figure was $1255 million in GPN’s case. Royal Caribbean Cruises Ltd. (NYSE:RCL) is the most popular stock in this table. On the other hand BT Group plc (NYSE:BT) is the least popular one with only 12 bullish hedge fund positions. Global Payments Inc (NYSE:GPN) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately GPN wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on GPN were disappointed as the stock returned -0.7% during the third quarter 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
