Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before last year’s Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Godaddy Inc (NYSE:GDDY) changed recently.
Godaddy Inc (NYSE:GDDY) was in 48 hedge funds’ portfolios at the end of the third quarter of 2019. GDDY investors should pay attention to an increase in activity from the world’s largest hedge funds of late. There were 44 hedge funds in our database with GDDY holdings at the end of the previous quarter. Our calculations also showed that GDDY isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
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.
Ricky Sandler of Eminence Capital
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind let’s view the fresh hedge fund action surrounding Godaddy Inc (NYSE:GDDY).
What does smart money think about 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. Below, you can check out the change in hedge fund sentiment towards GDDY over the last 17 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Robert Joseph Caruso’s Select Equity Group has the most valuable position in Godaddy Inc (NYSE:GDDY), worth close to $384.8 million, amounting to 2.6% of its total 13F portfolio. On Select Equity Group’s heels is 12 West Capital Management, led by Joel Ramin, holding a $253.2 million position; 16.3% of its 13F portfolio is allocated to the stock. Remaining peers that hold long positions comprise Ricky Sandler’s Eminence Capital, Renaissance Technologies and Paul Marshall and Ian Wace’s 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 13F portfolio. 12 West Capital Management is also relatively very bullish on the stock, dishing out 16.3 percent of its 13F equity portfolio to GDDY.
Now, specific money managers have been driving this bullishness. Blue Harbour Group, managed by Clifton S. Robbins, created 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 made a $33 million investment in the stock during the quarter. The other funds with new positions in the stock 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). This group of stocks’ market caps are closest to 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 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 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 4.3% so far in 2019 (through 12/23) and trailed 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 65 percent of these stocks already outperformed the market in 2019.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
