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Do Hedge Funds Love Green Dot Corporation (GDOT)?

Nina Todic

The 700+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Green Dot Corporation (NYSE:GDOT).

Green Dot Corporation (NYSE:GDOT) was in 20 hedge funds' portfolios at the end of September. GDOT investors should be aware of an increase in activity from the world's largest hedge funds lately. There were 18 hedge funds in our database with GDOT positions at the end of the previous quarter. Our calculations also showed that GDOT 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.

5 Most Popular Stocks Among Hedge Funds

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_30602" align="aligncenter" width="489"] Philippe Laffont of Coatue Management[/caption]

COATUE MANAGEMENT

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. Let's take a peek at the new hedge fund action regarding Green Dot Corporation (NYSE:GDOT).

What have hedge funds been doing with Green Dot Corporation (NYSE:GDOT)?

At the end of the third quarter, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in GDOT over the last 17 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 Green Dot Corporation (NYSE:GDOT) was held by Citadel Investment Group, which reported holding $46.7 million worth of stock at the end of September. It was followed by D E Shaw with a $33.4 million position. Other investors bullish on the company included Coatue Management, Two Sigma Advisors, and Millennium Management. In terms of the portfolio weights assigned to each position Toscafund Asset Management allocated the biggest weight to Green Dot Corporation (NYSE:GDOT), around 16.51% of its 13F portfolio. AlphaOne Capital Partners is also relatively very bullish on the stock, dishing out 0.36 percent of its 13F equity portfolio to GDOT.

As one would reasonably expect, key hedge funds were leading the bulls' herd. Alyeska Investment Group, managed by Anand Parekh, established the most outsized position in Green Dot Corporation (NYSE:GDOT). Alyeska Investment Group had $2.7 million invested in the company at the end of the quarter. Brandon Haley's Holocene Advisors also made a $2.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Noam Gottesman's GLG Partners, Joshua Nash's Ulysses Management, and Joel Greenblatt's Gotham Asset Management.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Green Dot Corporation (NYSE:GDOT) but similarly valued. We will take a look at Aimmune Therapeutics Inc (NASDAQ:AIMT), Conduent Incorporated (NYSE:CNDT), Helios Technologies, Inc. (NASDAQ:HLIO), and Seacoast Banking Corporation of Florida (NASDAQ:SBCF). All of these stocks' market caps are closest to GDOT's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AIMT,20,192504,7 CNDT,30,418046,3 HLIO,3,75356,-1 SBCF,6,22958,0 Average,14.75,177216,2.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $177 million. That figure was $192 million in GDOT's case. Conduent Incorporated (NYSE:CNDT) is the most popular stock in this table. On the other hand Helios Technologies, Inc. (NASDAQ:HLIO) is the least popular one with only 3 bullish hedge fund positions. Green Dot Corporation (NYSE:GDOT) 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 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. Unfortunately GDOT wasn't nearly as popular as these 20 stocks and hedge funds that were betting on GDOT were disappointed as the stock returned -5.9% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 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.

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