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In this article we will analyze whether Groupon Inc (NASDAQ:GRPN) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.
Is GRPN stock a buy? Groupon Inc (NASDAQ:GRPN) has experienced an increase in enthusiasm from smart money recently. Groupon Inc (NASDAQ:GRPN) was in 26 hedge funds' portfolios at the end of December. The all time high for this statistic is 33. There were 16 hedge funds in our database with GRPN holdings at the end of September. Our calculations also showed that GRPN isn't among the 30 most popular stocks among hedge funds (click for Q4 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 124 percentage points since March 2017 (see the details here).
David E. Shaw of D.E. Shaw
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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 website. With all of this in mind let's check out the key hedge fund action regarding Groupon Inc (NASDAQ:GRPN).
Do Hedge Funds Think GRPN Is A Good Stock To Buy Now?
At the end of the fourth quarter, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 63% from the third quarter of 2020. The graph below displays the number of hedge funds with bullish position in GRPN over the last 22 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Groupon Inc (NASDAQ:GRPN) was held by MIG Capital, which reported holding $60.7 million worth of stock at the end of December. It was followed by D E Shaw with a $42.9 million position. Other investors bullish on the company included Renaissance Technologies, Arrowstreet Capital, and Prentice Capital Management. In terms of the portfolio weights assigned to each position MIG Capital allocated the biggest weight to Groupon Inc (NASDAQ:GRPN), around 5.49% of its 13F portfolio. Prentice Capital Management is also relatively very bullish on the stock, earmarking 4.8 percent of its 13F equity portfolio to GRPN.
As industrywide interest jumped, some big names were breaking ground themselves. Parian Global Management, managed by Zachary Miller, initiated the largest position in Groupon Inc (NASDAQ:GRPN). Parian Global Management had $16.7 million invested in the company at the end of the quarter. Joseph Samuels's Islet Management also initiated a $12.3 million position during the quarter. The other funds with new positions in the stock are Ravee Mehta's Nishkama Capital, Leonard Green's Leonard Green & Partners, and Spencer M. Waxman's Shannon River Fund Management.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Groupon Inc (NASDAQ:GRPN) but similarly valued. We will take a look at Warrior Met Coal Inc. (NYSE:HCC), Enterprise Financial Services Corp (NASDAQ:EFSC), ArcBest Corp (NASDAQ:ARCB), National Research Corporation (NASDAQ:NRC), Ontrak, Inc. (NASDAQ:OTRK), H&E Equipment Services, Inc. (NASDAQ:HEES), and Luminex Corporation (NASDAQ:LMNX). All of these stocks' market caps are closest to GRPN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HCC,25,235909,-1 EFSC,14,33347,0 ARCB,14,81371,-3 NRC,12,34549,6 OTRK,13,21575,1 HEES,17,52428,3 LMNX,23,157207,-6 Average,16.9,88055,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.9 hedge funds with bullish positions and the average amount invested in these stocks was $88 million. That figure was $245 million in GRPN's case. Warrior Met Coal Inc. (NYSE:HCC) is the most popular stock in this table. On the other hand National Research Corporation (NASDAQ:NRC) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Groupon Inc (NASDAQ:GRPN) is more popular among hedge funds. Our overall hedge fund sentiment score for GRPN is 83.6. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks returned 12.3% in 2021 through April 19th but still managed to beat the market by 0.9 percentage points. Hedge funds were also right about betting on GRPN as the stock returned 29.2% since the end of December (through 4/19) 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.