In this article we will take a look at whether hedge funds think Groupon Inc (NASDAQ:GRPN) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is GRPN a good stock to buy? Groupon Inc (NASDAQ:GRPN) investors should pay attention to an increase in support from the world’s most elite money managers lately. Groupon Inc (NASDAQ:GRPN) was in 28 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 33. Our calculations also showed that GRPN isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 79 percentage points since March 2017 (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.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind we’re going to check out the latest hedge fund action encompassing Groupon Inc (NASDAQ:GRPN).
Do Hedge Funds Think GRPN Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 12% from the previous quarter. The graph below displays the number of hedge funds with bullish position in GRPN over the last 24 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.
Among these funds, PAR Capital Management held the most valuable stake in Groupon Inc (NASDAQ:GRPN), which was worth $59.1 million at the end of the second quarter. On the second spot was MIG Capital which amassed $58.5 million worth of shares. D E Shaw, Citadel Investment Group, and Prentice Capital 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 Prentice Capital Management allocated the biggest weight to Groupon Inc (NASDAQ:GRPN), around 7.38% of its 13F portfolio. MIG Capital is also relatively very bullish on the stock, setting aside 5.18 percent of its 13F equity portfolio to GRPN.
Consequently, key money managers have been driving this bullishness. PDT Partners, managed by Peter Muller, assembled the biggest position in Groupon Inc (NASDAQ:GRPN). PDT Partners had $4.7 million invested in the company at the end of the quarter. Ira Unschuld’s Brant Point Investment Management also made a $4.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Ira Unschuld’s Brant Point Investment Management, Lee Ainslie’s Maverick Capital, and Michael Gelband’s ExodusPoint Capital.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Groupon Inc (NASDAQ:GRPN) but similarly valued. We will take a look at Nautilus Biotechnology Inc (NASDAQ:NAUT), Playa Hotels & Resorts N.V. (NASDAQ:PLYA), Gogo Inc (NASDAQ:GOGO), Southside Bancshares, Inc. (NASDAQ:SBSI), Hawaiian Holdings, Inc. (NASDAQ:HA), Clear Channel Outdoor Holdings, Inc. (NYSE:CCO), and Tabula Rasa HealthCare, Inc. (NASDAQ:TRHC). All of these stocks’ market caps match GRPN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NAUT | 20 | 185115 | 2 |
| PLYA | 31 | 324663 | 5 |
| GOGO | 22 | 180033 | 4 |
| SBSI | 8 | 40028 | 1 |
| HA | 16 | 63664 | 0 |
| CCO | 27 | 253209 | -2 |
| TRHC | 4 | 15108 | -3 |
| Average | 18.3 | 151689 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.3 hedge funds with bullish positions and the average amount invested in these stocks was $152 million. That figure was $321 million in GRPN’s case. Playa Hotels & Resorts N.V. (NASDAQ:PLYA) is the most popular stock in this table. On the other hand Tabula Rasa HealthCare, Inc. (NASDAQ:TRHC) is the least popular one with only 4 bullish hedge fund positions. Groupon Inc (NASDAQ:GRPN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GRPN is 77.9. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and beat the market again by 4.5 percentage points. Unfortunately GRPN wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on GRPN were disappointed as the stock returned -45.8% since the end of June (through 10/15) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
