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At Insider Monkey, we pore over the filings of nearly 866 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of March 31st. In this article, we will use that wealth of knowledge to determine whether or not Green Dot Corporation (NYSE:GDOT) makes for a good investment right now.
Green Dot Corporation (NYSE:GDOT) was in 26 hedge funds' portfolios at the end of March. The all time high for this statistic is 32. GDOT investors should be aware of a decrease in hedge fund interest recently. There were 32 hedge funds in our database with GDOT holdings at the end of December. Our calculations also showed that GDOT isn't among the 30 most popular stocks among hedge funds (click for Q1 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 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Jeffrey Smith of Starboard Value LP
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we're going to take a peek at the latest hedge fund action surrounding Green Dot Corporation (NYSE:GDOT).
Do Hedge Funds Think GDOT Is A Good Stock To Buy Now?
At Q1's end, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of -19% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in GDOT over the last 23 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Green Dot Corporation (NYSE:GDOT) was held by Starboard Value LP, which reported holding $242.4 million worth of stock at the end of December. It was followed by Brahman Capital with a $47 million position. Other investors bullish on the company included No Street Capital, Citadel Investment Group, and Greenhouse Funds. In terms of the portfolio weights assigned to each position No Street Capital allocated the biggest weight to Green Dot Corporation (NYSE:GDOT), around 6.03% of its 13F portfolio. Starboard Value LP is also relatively very bullish on the stock, earmarking 5.17 percent of its 13F equity portfolio to GDOT.
Since Green Dot Corporation (NYSE:GDOT) has witnessed falling interest from the smart money, logic holds that there exists a select few hedge funds that elected to cut their full holdings in the first quarter. It's worth mentioning that Philippe Laffont's Coatue Management dumped the biggest stake of the "upper crust" of funds monitored by Insider Monkey, comprising close to $39.7 million in stock, and Renaissance Technologies was right behind this move, as the fund cut about $8.6 million worth. These moves are important to note, as total hedge fund interest fell by 6 funds in the first quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Green Dot Corporation (NYSE:GDOT) but similarly valued. These stocks are Aeva Technologies, Inc. (NYSE:AEVA), Trinseo S.A. (NYSE:TSE), IGM Biosciences, Inc. (NASDAQ:IGMS), Forward Air Corporation (NASDAQ:FWRD), Golub Capital BDC Inc (NASDAQ:GBDC), Amarin Corporation plc (NASDAQ:AMRN), and Gentherm Inc (NASDAQ:THRM). This group of stocks' market values are similar to GDOT's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AEVA,16,378663,0 TSE,17,51427,1 IGMS,18,759325,0 FWRD,13,285958,2 GBDC,15,47180,0 AMRN,22,444225,-2 THRM,13,113507,0 Average,16.3,297184,0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.3 hedge funds with bullish positions and the average amount invested in these stocks was $297 million. That figure was $514 million in GDOT's case. Amarin Corporation plc (NASDAQ:AMRN) is the most popular stock in this table. On the other hand Forward Air Corporation (NASDAQ:FWRD) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Green Dot Corporation (NYSE:GDOT) is more popular among hedge funds. Our overall hedge fund sentiment score for GDOT is 73.4. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and still beat the market by 6.7 percentage points. Unfortunately GDOT wasn't nearly as popular as these 5 stocks and hedge funds that were betting on GDOT were disappointed as the stock returned 2.4% since the end of the first quarter (through 7/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.