Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about GoPro Inc (NASDAQ:GPRO).
Is GPRO stock a buy? Hedge funds were becoming hopeful. The number of bullish hedge fund bets went up by 14 in recent months. GoPro Inc (NASDAQ:GPRO) was in 28 hedge funds’ portfolios at the end of December. The all time high for this statistic is 25. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that GPRO 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 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 S&P 500 ETFs by 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. Keeping this in mind we’re going to take a peek at the new hedge fund action regarding GoPro Inc (NASDAQ:GPRO).
Do Hedge Funds Think GPRO Is A Good Stock To Buy Now?
At Q4’s end, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 100% from the third quarter of 2020. By comparison, 10 hedge funds held shares or bullish call options in GPRO a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
Among these funds, Lynrock Lake held the most valuable stake in GoPro Inc (NASDAQ:GPRO), which was worth $84.4 million at the end of the fourth quarter. On the second spot was Prentice Capital Management which amassed $83.7 million worth of shares. D E Shaw, Maverick Capital, and Corriente Advisors 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 Prentice Capital Management allocated the biggest weight to GoPro Inc (NASDAQ:GPRO), around 22.58% of its 13F portfolio. Corriente Advisors is also relatively very bullish on the stock, earmarking 6.6 percent of its 13F equity portfolio to GPRO.
As aggregate interest increased, specific money managers have jumped into GoPro Inc (NASDAQ:GPRO) headfirst. Corriente Advisors, managed by Mark Hart III, established the most outsized position in GoPro Inc (NASDAQ:GPRO). Corriente Advisors had $27.7 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $3.5 million position during the quarter. The other funds with brand new GPRO positions are Christopher Hillary’s Roubaix Capital, Joe DiMenna’s ZWEIG DIMENNA PARTNERS, and Greg Eisner’s Engineers Gate Manager.
Let’s check out hedge fund activity in other stocks similar to GoPro Inc (NASDAQ:GPRO). These stocks are The E.W. Scripps Company (NYSE:SSP), Linx S.A. (NYSE:LINX), Inhibrx, Inc. (NASDAQ:INBX), Alexander & Baldwin Inc (NYSE:ALEX), Model N Inc (NYSE:MODN), Unisys Corporation (NYSE:UIS), and Crescent Point Energy Corp (NYSE:CPG). This group of stocks’ market values are closest to GPRO’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SSP | 12 | 133995 | -2 |
| LINX | 6 | 37735 | 1 |
| INBX | 11 | 312736 | 1 |
| ALEX | 12 | 46157 | -3 |
| MODN | 15 | 94772 | -7 |
| UIS | 16 | 104235 | 2 |
| CPG | 12 | 46429 | 1 |
| Average | 12 | 110866 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $111 million. That figure was $340 million in GPRO’s case. Unisys Corporation (NYSE:UIS) is the most popular stock in this table. On the other hand Linx S.A. (NYSE:LINX) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks GoPro Inc (NASDAQ:GPRO) is more popular among hedge funds. Our overall hedge fund sentiment score for GPRO is 90. 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 returned 12.3% in 2021 through April 19th but still managed to beat the market by 0.9 percentage points. Hedge funds were also right about betting on GPRO as the stock returned 34.2% since the end of December (through 4/19) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
