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Did Hedge Funds Drop The Ball On GoPro Inc (GPRO) ?

Reymerlyn Martin

Reputable billionaire investors such as Jim Simons, Cliff Asness and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won't accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.

Is GoPro Inc (NASDAQ:GPRO) ready to rally soon? Investors who are in the know are selling. The number of long hedge fund positions shrunk by 1 lately. Our calculations also showed that GPRO isn't among the 30 most popular stocks among hedge funds.

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 flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Dmitry Balyasny

We're going to take a peek at the recent hedge fund action regarding GoPro Inc (NASDAQ:GPRO).

How are hedge funds trading GoPro Inc (NASDAQ:GPRO)?

At Q4's end, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from the previous quarter. The graph below displays the number of hedge funds with bullish position in GPRO 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.

GPRO_may2019

More specifically, Renaissance Technologies was the largest shareholder of GoPro Inc (NASDAQ:GPRO), with a stake worth $20.9 million reported as of the end of December. Trailing Renaissance Technologies was Maverick Capital, which amassed a stake valued at $10.8 million. Millennium Management, PDT Partners, and Blue Mountain Capital were also very fond of the stock, giving the stock large weights in their portfolios.

Due to the fact that GoPro Inc (NASDAQ:GPRO) has experienced declining sentiment from hedge fund managers, it's easy to see that there was a specific group of fund managers who sold off their full holdings last quarter. Intriguingly, Paul Marshall and Ian Wace's Marshall Wace LLP dropped the biggest position of all the hedgies monitored by Insider Monkey, comprising about $16.7 million in call options. Dmitry Balyasny's fund, Balyasny Asset Management, also sold off its call options, about $1.1 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 1 funds last quarter.

Let's now take a look at hedge fund activity in other stocks similar to GoPro Inc (NASDAQ:GPRO). These stocks are Funko, Inc. (NASDAQ:FNKO), Nova Measuring Instruments Ltd. (NASDAQ:NVMI), Civitas Solutions Inc (NYSE:CIVI), and SIGA Technologies Inc. (NASDAQ:SIGA). This group of stocks' market caps are closest to GPRO's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FNKO,13,39529,3 NVMI,9,74480,0 CIVI,15,76552,3 SIGA,10,44299,1 Average,11.75,58715,1.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $59 million. That figure was $48 million in GPRO's case. Civitas Solutions Inc (NYSE:CIVI) is the most popular stock in this table. On the other hand Nova Measuring Instruments Ltd. (NASDAQ:NVMI) is the least popular one with only 9 bullish hedge fund positions. GoPro Inc (NASDAQ:GPRO) 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 GPRO as the stock returned 48.1% 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.

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