Should You Buy Godaddy Inc (GDDY)?

Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant out-performance. These stocks have been on a tear since the end of June, outperforming large-cap index funds by more than 10 percentage points. That’s why we pay special attention to hedge fund activity in these stocks.

Godaddy Inc (NYSE:GDDY) shares haven’t seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged. The stock was in 23 hedge funds’ portfolios at the end of September. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Sonoco Products Company (NYSE:SON), Vail Resorts, Inc. (NYSE:MTN), and AptarGroup, Inc. (NYSE:ATR) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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Keeping this in mind, we’re going to view the key action surrounding Godaddy Inc (NYSE:GDDY).

Hedge fund activity in Godaddy Inc (NYSE:GDDY)

At the end of the third quarter, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, unchanged from one quarter earlier. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Silver Lake Partners holds the number one position in Godaddy Inc (NYSE:GDDY). According to regulatory filings, the fund has a $1.09 billion position in the stock, comprising 22.7% of its 13F portfolio. The second most bullish fund manager is Junto Capital Management, run by James Parsons, which holds a $36.2 million position; the fund has 4.7% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions encompass John Overdeck and David Siegel’s Two Sigma Advisors, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Jim Simons’s Renaissance Technologies.

Judging by the fact that Godaddy Inc (NYSE:GDDY) has experienced no change in interest from the aggregate hedge fund industry, we shall look at a sect of hedgies that decided to sell off their entire stakes by the end of the third quarter. Interestingly, Drew Cupps’s Cupps Capital Management dumped the largest stake of the “upper crust” of funds tracked by Insider Monkey, totaling close to $3.2 million in stock. David E. Shaw’s fund, D E Shaw, also sold off its stock, about $0.9 million worth of GDDY shares. These bearish behaviors are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Godaddy Inc (NYSE:GDDY) but similarly valued. These stocks are Sonoco Products Company (NYSE:SON), Vail Resorts, Inc. (NYSE:MTN), AptarGroup, Inc. (NYSE:ATR), and Watsco Inc (NYSE:WSO). This group of stocks’ market valuations resemble GDDY’s market valuation.

As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $207 million. That figure was a whooping $1.28 billion in GDDY’s case. Vail Resorts, Inc. (NYSE:MTN) is the most popular stock in this table. On the other hand AptarGroup, Inc. (NYSE:ATR) is the least popular one with only 12 bullish hedge fund positions. Godaddy Inc (NYSE:GDDY) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard MTN might be a better candidate to consider a long position.

Disclosure: none.