In this article we will check out the progression of hedge fund sentiment towards Groupon Inc (NASDAQ:GRPN) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Groupon Inc (NASDAQ:GRPN) was in 18 hedge funds' portfolios at the end of the first quarter of 2020. GRPN has experienced a decrease in hedge fund interest in recent months. There were 26 hedge funds in our database with GRPN positions at the end of the previous quarter. Our calculations also showed that GRPN isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_747408" align="aligncenter" width="398"] Paul Reeder of PAR Capital Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to go over the key hedge fund action regarding Groupon Inc (NASDAQ:GRPN).
Hedge fund activity in Groupon Inc (NASDAQ:GRPN)
At Q1's end, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -31% from the previous quarter. By comparison, 26 hedge funds held shares or bullish call options in GRPN a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, MIG Capital was the largest shareholder of Groupon Inc (NASDAQ:GRPN), with a stake worth $31.9 million reported as of the end of September. Trailing MIG Capital was PAR Capital Management, which amassed a stake valued at $21.4 million. Citadel Investment Group, Arrowstreet Capital, and D E Shaw 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 MIG Capital allocated the biggest weight to Groupon Inc (NASDAQ:GRPN), around 3.75% of its 13F portfolio. Cloverdale Capital Management is also relatively very bullish on the stock, earmarking 1.34 percent of its 13F equity portfolio to GRPN.
Due to the fact that Groupon Inc (NASDAQ:GRPN) has experienced falling interest from the smart money, it's easy to see that there is a sect of hedgies that decided to sell off their positions entirely heading into Q4. Intriguingly, Claus Moller's P2 Capital Partners said goodbye to the biggest stake of all the hedgies tracked by Insider Monkey, totaling close to $44.4 million in stock. Joshua Nash's fund, Ulysses Management, also dropped its stock, about $20.8 million worth. These transactions are important to note, as total hedge fund interest fell by 8 funds heading into Q4.
Let's now review hedge fund activity in other stocks similar to Groupon Inc (NASDAQ:GRPN). We will take a look at IMAX Corporation (NYSE:IMAX), First Defiance Financial Corp. (NASDAQ:FDEF), Oi SA (NYSE:OIBR), and Vanda Pharmaceuticals Inc. (NASDAQ:VNDA). This group of stocks' market values are closest to GRPN's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IMAX,17,38681,3 FDEF,10,40954,1 OIBR,8,58613,-4 VNDA,20,178955,0 Average,13.75,79301,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $79 million. That figure was $74 million in GRPN's case. Vanda Pharmaceuticals Inc. (NASDAQ:VNDA) is the most popular stock in this table. On the other hand Oi SA (NYSE:OIBR) is the least popular one with only 8 bullish hedge fund positions. Groupon Inc (NASDAQ:GRPN) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd but beat the market by 15.9 percentage points. Unfortunately GRPN wasn't nearly as popular as these 10 stocks and hedge funds that were betting on GRPN were disappointed as the stock returned 2.3% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.