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Should I Buy GoPro Inc (GPRO)?

·5 min read

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding GoPro Inc (NASDAQ:GPRO).

GoPro Inc (NASDAQ:GPRO) was in 31 hedge funds' portfolios at the end of September. The all time high for this statistic is 36. GPRO has experienced an increase in hedge fund interest lately. There were 28 hedge funds in our database with GPRO positions at the end of the second quarter. Our calculations also showed that GPRO isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings).

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 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. Now let's review the new hedge fund action encompassing GoPro Inc (NASDAQ:GPRO).

David Einhorn of Greenlight Capital

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

At the end of September, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in GPRO over the last 25 quarters. With the smart money's capital changing hands, there exists an "upper tier" of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

More specifically, Prentice Capital Management was the largest shareholder of GoPro Inc (NASDAQ:GPRO), with a stake worth $63.9 million reported as of the end of September. Trailing Prentice Capital Management was D E Shaw, which amassed a stake valued at $46.4 million. Iridian Asset Management, Greenlight Capital, and Citadel Investment Group 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 16.15% of its 13F portfolio. Greenlight Capital is also relatively very bullish on the stock, designating 2.3 percent of its 13F equity portfolio to GPRO.

Now, specific money managers have been driving this bullishness. Schonfeld Strategic Advisors, managed by Ryan Tolkin (CIO), initiated the biggest position in GoPro Inc (NASDAQ:GPRO). Schonfeld Strategic Advisors had $2.7 million invested in the company at the end of the quarter. Mika Toikka's AlphaCrest Capital Management also initiated a $1.2 million position during the quarter. The following funds were also among the new GPRO investors: Noam Gottesman's GLG Partners, Peter Algert's Algert Global, and Donald Sussman's Paloma Partners.

Let's now review hedge fund activity in other stocks similar to GoPro Inc (NASDAQ:GPRO). These stocks are Omega Flex, Inc. (NASDAQ:OFLX), IronNet Inc. (NYSE:IRNT), Steelcase Inc. (NYSE:SCS), Kronos Worldwide, Inc. (NYSE:KRO), Caribou Biosciences Inc. (NASDAQ:CRBU), Global Industrial Company (NYSE:GIC), and MGP Ingredients Inc (NASDAQ:MGPI). All of these stocks' market caps are similar to GPRO's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position OFLX,3,4517,0 IRNT,13,45219,11 SCS,12,114546,-4 KRO,12,19947,1 CRBU,26,297861,26 GIC,11,34388,0 MGPI,13,32105,-1 Average,12.9,78369,4.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.9 hedge funds with bullish positions and the average amount invested in these stocks was $78 million. That figure was $293 million in GPRO's case. Caribou Biosciences Inc. (NASDAQ:CRBU) is the most popular stock in this table. On the other hand Omega Flex, Inc. (NASDAQ:OFLX) is the least popular one with only 3 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 83.8. 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 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 returned 28.6% in 2021 through November 30th but still managed to beat the market by 5.6 percentage points. Hedge funds were also right about betting on GPRO as the stock returned 6.8% since the end of September (through 11/30) 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.