We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Glu Mobile Inc. (NASDAQ:GLUU).
Glu Mobile Inc. (NASDAQ:GLUU) shareholders have witnessed a decrease in hedge fund sentiment recently. GLUU was in 22 hedge funds' portfolios at the end of the third quarter of 2019. There were 23 hedge funds in our database with GLUU positions at the end of the previous quarter. Our calculations also showed that GLUU isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_256989" align="aligncenter" width="600"] Dmitry Balyasny of Balyasny Asset Managemnet[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to take a glance at the fresh hedge fund action regarding Glu Mobile Inc. (NASDAQ:GLUU).
How are hedge funds trading Glu Mobile Inc. (NASDAQ:GLUU)?
At Q3's end, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GLUU over the last 17 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.
The largest stake in Glu Mobile Inc. (NASDAQ:GLUU) was held by Alyeska Investment Group, which reported holding $21.7 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $10 million position. Other investors bullish on the company included Adage Capital Management, Balyasny Asset Management, and Marshall Wace. In terms of the portfolio weights assigned to each position Raging Capital Management allocated the biggest weight to Glu Mobile Inc. (NASDAQ:GLUU), around 0.41% of its 13F portfolio. Greenhouse Funds is also relatively very bullish on the stock, setting aside 0.37 percent of its 13F equity portfolio to GLUU.
Because Glu Mobile Inc. (NASDAQ:GLUU) has faced bearish sentiment from the entirety of the hedge funds we track, it's safe to say that there was a specific group of hedge funds that decided to sell off their full holdings in the third quarter. At the top of the heap, Jacob Doft's Highline Capital Management said goodbye to the largest position of the 750 funds followed by Insider Monkey, comprising close to $22.3 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital was right behind this move, as the fund cut about $5.3 million worth. These transactions are important to note, as total hedge fund interest dropped by 1 funds in the third quarter.
Let's check out hedge fund activity in other stocks similar to Glu Mobile Inc. (NASDAQ:GLUU). These stocks are Arvinas, Inc. (NASDAQ:ARVN), CBTX, Inc. (NASDAQ:CBTX), Corporacion America Airports SA (NYSE:CAAP), and Cerus Corporation (NASDAQ:CERS). All of these stocks' market caps are closest to GLUU's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ARVN,11,140075,-2 CBTX,7,9568,0 CAAP,11,27126,0 CERS,8,84245,-5 Average,9.25,65254,-1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.25 hedge funds with bullish positions and the average amount invested in these stocks was $65 million. That figure was $88 million in GLUU's case. Arvinas, Inc. (NASDAQ:ARVN) is the most popular stock in this table. On the other hand CBTX, Inc. (NASDAQ:CBTX) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Glu Mobile Inc. (NASDAQ:GLUU) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on GLUU as the stock returned 10.8% during the first two months of Q4 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.
Disclosure: None. This article was originally published at Insider Monkey.