Legendary investors such as Jeffrey Talpins and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don't publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That's why we analyze the activity of those elite funds in these small-cap stocks. In the following paragraphs, we analyze GreenSky, Inc. (NASDAQ:GSKY) from the perspective of those elite funds.
Hedge fund interest in GreenSky, Inc. (NASDAQ:GSKY) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Deluxe Corporation (NYSE:DLX), Four Corners Property Trust, Inc. (NYSE:FCPT), and GCP Applied Technologies Inc. (NYSE:GCP) to gather more data points.
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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's take a look at the new hedge fund action encompassing GreenSky, Inc. (NASDAQ:GSKY).
Hedge fund activity in GreenSky, Inc. (NASDAQ:GSKY)
Heading into the first quarter of 2019, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GSKY over the last 14 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Two Sigma Advisors held the most valuable stake in GreenSky, Inc. (NASDAQ:GSKY), which was worth $4.9 million at the end of the fourth quarter. On the second spot was Marshall Wace LLP which amassed $4.1 million worth of shares. Moreover, D E Shaw, Scoggin, and Harvest Capital Strategies were also bullish on GreenSky, Inc. (NASDAQ:GSKY), allocating a large percentage of their portfolios to this stock.
Because GreenSky, Inc. (NASDAQ:GSKY) has experienced falling interest from the smart money, we can see that there was a specific group of fund managers that slashed their positions entirely by the end of the third quarter. Interestingly, Christopher James's Partner Fund Management said goodbye to the largest stake of the 700 funds monitored by Insider Monkey, totaling about $36.7 million in stock, and Robert Pohly's Samlyn Capital was right behind this move, as the fund dumped about $17.4 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's also examine hedge fund activity in other stocks similar to GreenSky, Inc. (NASDAQ:GSKY). We will take a look at Deluxe Corporation (NYSE:DLX), Four Corners Property Trust, Inc. (NYSE:FCPT), GCP Applied Technologies Inc. (NYSE:GCP), and Renasant Corporation (NASDAQ:RNST). This group of stocks' market caps are similar to GSKY's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DLX,24,99926,3 FCPT,13,97064,0 GCP,16,435331,-3 RNST,13,34274,-4 Average,16.5,166649,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $167 million. That figure was $33 million in GSKY's case. Deluxe Corporation (NYSE:DLX) is the most popular stock in this table. On the other hand Four Corners Property Trust, Inc. (NYSE:FCPT) is the least popular one with only 13 bullish hedge fund positions. GreenSky, Inc. (NASDAQ:GSKY) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on GSKY as the stock returned 61% and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.