While the market driven by short-term sentiment influenced by uncertainty regarding the future of the interest rate environment in the US, declining oil prices and the trade war with China, many smart money investors kept their optimism regarding the current bull run in the fourth quarter, while still hedging 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 The Geo Group, Inc. (NYSE:GEO).
Is The Geo Group, Inc. (NYSE:GEO) a buy right now? Investors who are in the know are in a bullish mood. The number of bullish hedge fund bets inched up by 1 lately. Our calculations also showed that GEO isn’t among the 30 most popular stocks among hedge funds. GEO was in 18 hedge funds’ portfolios at the end of December. There were 17 hedge funds in our database with GEO positions at the end of the previous quarter.
According to most investors, hedge funds are assumed to be underperforming, old financial vehicles of the past. While there are over 8000 funds in operation at present, We look at the top tier of this club, around 750 funds. These investment experts watch over the majority of all hedge funds’ total asset base, and by observing their matchless investments, Insider Monkey has discovered many investment strategies that have historically outrun the S&P 500 index. Insider Monkey’s flagship hedge fund strategy outrun the S&P 500 index by nearly 5 percentage points annually since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.
Let’s take a look at the recent hedge fund action encompassing The Geo Group, Inc. (NYSE:GEO).
What have hedge funds been doing with The Geo Group, Inc. (NYSE:GEO)?
Heading into the first quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from one quarter earlier. On the other hand, there were a total of 13 hedge funds with a bullish position in GEO a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in The Geo Group, Inc. (NYSE:GEO) was held by Capital Growth Management, which reported holding $33.5 million worth of stock at the end of September. It was followed by Winton Capital Management with a $12 million position. Other investors bullish on the company included D E Shaw, Arrowstreet Capital, and Renaissance Technologies.
With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Weld Capital Management, managed by Minhua Zhang, assembled the biggest position in The Geo Group, Inc. (NYSE:GEO). Weld Capital Management had $1.5 million invested in the company at the end of the quarter. Bruce Kovner’s Caxton Associates LP also initiated a $0.9 million position during the quarter. The other funds with new positions in the stock are Peter Algert and Kevin Coldiron’s Algert Coldiron Investors and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s go over hedge fund activity in other stocks similar to The Geo Group, Inc. (NYSE:GEO). We will take a look at Pampa Energia S.A. (NYSE:PAM), Range Resources Corp. (NYSE:RRC), Premier Inc (NASDAQ:PINC), and South Jersey Industries Inc (NYSE:SJI). This group of stocks’ market valuations match GEO’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PAM | 15 | 295211 | 0 |
| RRC | 31 | 724194 | 2 |
| PINC | 18 | 181570 | -3 |
| SJI | 12 | 70335 | -2 |
| Average | 19 | 317828 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $318 million. That figure was $95 million in GEO’s case. Range Resources Corp. (NYSE:RRC) is the most popular stock in this table. On the other hand South Jersey Industries Inc (NYSE:SJI) is the least popular one with only 12 bullish hedge fund positions. The Geo Group, Inc. (NYSE:GEO) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately GEO wasn’t nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); GEO investors were disappointed as the stock returned 0.8% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
