Is GME Stock A Buy or Sell?

We at Insider Monkey have gone over 887 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article, we look at what those funds think of GameStop Corp. (NYSE:GME) based on that data.

Is GME stock a buy? GameStop Corp. (NYSE:GME) has experienced a decrease in enthusiasm from smart money recently. GameStop Corp. (NYSE:GME) was in 27 hedge funds’ portfolios at the end of December. The all time high for this statistic is 36. There were 28 hedge funds in our database with GME positions at the end of the third quarter. Our calculations also showed that GME isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).

Lee Ainslie of Maverick Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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 website. Now let’s view the latest hedge fund action surrounding GameStop Corp. (NYSE:GME).

Do Hedge Funds Think GME Is A Good Stock To Buy Now?

At fourth quarter’s end, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from the third quarter of 2020. By comparison, 20 hedge funds held shares or bullish call options in GME a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Rima Senvest Management held the most valuable stake in GameStop Corp. (NYSE:GME), which was worth $95.2 million at the end of the fourth quarter. On the second spot was Maverick Capital which amassed $87.8 million worth of shares. D E Shaw, Masters Capital Management, and Paradice Investment Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Rima Senvest Management allocated the biggest weight to GameStop Corp. (NYSE:GME), around 3.71% of its 13F portfolio. Maverick Capital is also relatively very bullish on the stock, designating 1.41 percent of its 13F equity portfolio to GME.

Judging by the fact that GameStop Corp. (NYSE:GME) has experienced declining sentiment from the smart money, we can see that there was a specific group of hedgies that decided to sell off their full holdings by the end of the fourth quarter. Interestingly, Anand Parekh’s Alyeska Investment Group dumped the largest stake of all the hedgies monitored by Insider Monkey, comprising about $17.5 million in stock. Michael Burry’s fund, Scion Asset Management, also sold off its stock, about $17.4 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 1 funds by the end of the fourth quarter.

Let’s now take a look at hedge fund activity in other stocks similar to GameStop Corp. (NYSE:GME). We will take a look at Eagle Bancorp, Inc. (NASDAQ:EGBN), Astec Industries, Inc. (NASDAQ:ASTE), Newmark Group, Inc. (NASDAQ:NMRK), BioLife Solutions, Inc. (NASDAQ:BLFS), Trillium Therapeutics Inc. (NASDAQ:TRIL), 3D Systems Corporation (NYSE:DDD), and GMS Inc. (NYSE:GMS). This group of stocks’ market valuations are closest to GME’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.9 hedge funds with bullish positions and the average amount invested in these stocks was $204 million. That figure was $323 million in GME’s case. Trillium Therapeutics Inc. (NASDAQ:TRIL) is the most popular stock in this table. On the other hand Eagle Bancorp, Inc. (NASDAQ:EGBN) is the least popular one with only 10 bullish hedge fund positions. GameStop Corp. (NYSE:GME) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GME is 59.2. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. Hedge funds were also right about betting on GME as the stock returned 772.5% since the end of Q4 (through 4/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Disclosure: None. This article was originally published at Insider Monkey.