Was The Smart Money Right About GoHealth, Inc. (GOCO)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 873 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of June 30th, 2021. What do these smart investors think about GoHealth, Inc. (NASDAQ:GOCO)?

GoHealth, Inc. (NASDAQ:GOCO) was in 14 hedge funds’ portfolios at the end of June. The all time high for this statistic is 18. GOCO has experienced a decrease in support from the world’s most elite money managers of late. There were 17 hedge funds in our database with GOCO positions at the end of the first quarter. Our calculations also showed that GOCO isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Robert Atchinson of Adage Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, 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 take a look at the key hedge fund action regarding GoHealth, Inc. (NASDAQ:GOCO).

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

At the end of the second quarter, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in GOCO over the last 24 quarters. So, let’s see 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, Centerbridge Partners, managed by Mark T. Gallogly, holds the number one position in GoHealth, Inc. (NASDAQ:GOCO). Centerbridge Partners has a $456.1 million position in the stock, comprising 41.7% of its 13F portfolio. On Centerbridge Partners’s heels is Adage Capital Management, led by Phill Gross and Robert Atchinson, holding a $8.4 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other peers that hold long positions consist of Renaissance Technologies, Jonathan Berger’s Birch Grove Capital and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Centerbridge Partners allocated the biggest weight to GoHealth, Inc. (NASDAQ:GOCO), around 41.71% of its 13F portfolio. Birch Grove Capital is also relatively very bullish on the stock, earmarking 1.7 percent of its 13F equity portfolio to GOCO.

Seeing as GoHealth, Inc. (NASDAQ:GOCO) has experienced bearish sentiment from the smart money, we can see that there exists a select few hedgies that slashed their entire stakes heading into Q3. Intriguingly, J. Carlo Cannell’s Cannell Capital dumped the biggest position of the 750 funds monitored by Insider Monkey, valued at about $13.5 million in stock. Gavin Saitowitz and Cisco J. del Valle’s fund, Prelude Capital (previously Springbok Capital), also dropped its stock, about $2 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 3 funds heading into Q3.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as GoHealth, Inc. (NASDAQ:GOCO) but similarly valued. We will take a look at Mercury General Corporation (NYSE:MCY), Genius Sports Ltd (NYSE:GENI), Murphy Oil Corporation (NYSE:MUR), Murphy USA Inc. (NYSE:MUSA), Accolade, Inc. (NASDAQ:ACCD), Onto Innovation Inc. (NYSE:ONTO), and SPS Commerce, Inc. (NASDAQ:SPSC). This group of stocks’ market values are closest to GOCO’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.7 hedge funds with bullish positions and the average amount invested in these stocks was $292 million. That figure was $483 million in GOCO’s case. Genius Sports Ltd (NYSE:GENI) is the most popular stock in this table. On the other hand Mercury General Corporation (NYSE:MCY) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks GoHealth, Inc. (NASDAQ:GOCO) is even less popular than MCY. Our overall hedge fund sentiment score for GOCO is 25.3. 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. Hedge funds dodged a bullet by taking a bearish stance towards GOCO. Our calculations showed that the top 5 most popular hedge fund stocks returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 through November 5th but managed to beat the market again by 3.1 percentage points. Unfortunately GOCO wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was very bearish); GOCO investors were disappointed as the stock returned -55.1% since the end of the second quarter (through 11/5) 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 most of these stocks already outperformed the market since 2019.

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

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