The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards GrowGeneration Corp. (NASDAQ:GRWG).
Is GRWG a good stock to buy now? The smart money was taking a bearish view. The number of bullish hedge fund bets were cut by 1 in recent months. GrowGeneration Corp. (NASDAQ:GRWG) was in 10 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 11. Our calculations also showed that GRWG isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Richard Driehaus of Driehaus Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with 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 recent hedge fund action surrounding GrowGeneration Corp. (NASDAQ:GRWG).
Do Hedge Funds Think GRWG Is A Good Stock To Buy Now?
At third quarter’s end, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from the previous quarter. By comparison, 0 hedge funds held shares or bullish call options in GRWG a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Driehaus Capital, managed by Richard Driehaus, holds the biggest position in GrowGeneration Corp. (NASDAQ:GRWG). Driehaus Capital has a $23.3 million position in the stock, comprising 0.5% of its 13F portfolio. On Driehaus Capital’s heels is Scopus Asset Management, managed by Alexander Mitchell, which holds a $10.8 million position; 0.2% of its 13F portfolio is allocated to the stock. Some other members of the smart money that are bullish contain Elise Di Vincenzo Crumbine’s Stormborn Capital Management, Dmitry Balyasny’s Balyasny Asset Management and Alexander Mitchell’s Scopus Asset Management. In terms of the portfolio weights assigned to each position One68 Global Capital allocated the biggest weight to GrowGeneration Corp. (NASDAQ:GRWG), around 3.29% of its 13F portfolio. Stormborn Capital Management is also relatively very bullish on the stock, earmarking 2.79 percent of its 13F equity portfolio to GRWG.
Because GrowGeneration Corp. (NASDAQ:GRWG) has witnessed declining sentiment from the entirety of the hedge funds we track, logic holds that there was a specific group of hedge funds who sold off their entire stakes by the end of the third quarter. Interestingly, Renaissance Technologies said goodbye to the largest investment of the “upper crust” of funds watched by Insider Monkey, totaling about $2.4 million in stock, and Josh Goldberg’s G2 Investment Partners Management was right behind this move, as the fund sold off about $1.5 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to GrowGeneration Corp. (NASDAQ:GRWG). These stocks are Cincinnati Bell Inc. (NYSE:CBB), First Commonwealth Financial (NYSE:FCF), Endo International plc (NASDAQ:ENDP), Orion Engineered Carbons SA (NYSE:OEC), Textainer Group Holdings Limited (NYSE:TGH), Seritage Growth Properties (NYSE:SRG), and Phoenix Tree Holdings Limited (NYSE:DNK). This group of stocks’ market caps are closest to GRWG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CBB | 16 | 134906 | 1 |
| FCF | 18 | 27940 | 3 |
| ENDP | 17 | 159822 | -4 |
| OEC | 20 | 130513 | -1 |
| TGH | 9 | 17681 | 0 |
| SRG | 12 | 126062 | -6 |
| DNK | 3 | 151959 | 0 |
| Average | 13.6 | 106983 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.6 hedge funds with bullish positions and the average amount invested in these stocks was $107 million. That figure was $56 million in GRWG’s case. Orion Engineered Carbons SA (NYSE:OEC) is the most popular stock in this table. On the other hand Phoenix Tree Holdings Limited (NYSE:DNK) is the least popular one with only 3 bullish hedge fund positions. GrowGeneration Corp. (NASDAQ:GRWG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for GRWG is 51.9. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on GRWG as the stock returned 113.8% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
