You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund managers like Jeff Ubben, George Soros and Seth Klarman hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.
Godaddy Inc (NYSE:GDDY) has experienced an increase in activity from the world's largest hedge funds in recent months. GDDY was in 48 hedge funds' portfolios at the end of March. There were 43 hedge funds in our database with GDDY positions at the end of the previous quarter. Our calculations also showed that GDDY isn't among the 30 most popular stocks among hedge funds.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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 our short portfolio.
Let's take a glance at the new hedge fund action encompassing Godaddy Inc (NYSE:GDDY).
What does the smart money think about Godaddy Inc (NYSE:GDDY)?
Heading into the second quarter of 2019, a total of 48 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 12% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GDDY over the last 15 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 Godaddy Inc (NYSE:GDDY) was held by Select Equity Group, which reported holding $410.2 million worth of stock at the end of March. It was followed by Renaissance Technologies with a $268.1 million position. Other investors bullish on the company included D E Shaw, 12 West Capital Management, and Citadel Investment Group.
With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Point72 Asset Management, managed by Steve Cohen, assembled the most valuable position in Godaddy Inc (NYSE:GDDY). Point72 Asset Management had $105.5 million invested in the company at the end of the quarter. Alex Duran and Scott Hendrickson's Permian Investment Partners also made a $79 million investment in the stock during the quarter. The following funds were also among the new GDDY investors: Dennis Puri and Oliver Keller's Hunt Lane Capital, Phill Gross and Robert Atchinson's Adage Capital Management, and Marcelo Desio's Lucha Capital Management.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Godaddy Inc (NYSE:GDDY) but similarly valued. These stocks are Citrix Systems, Inc. (NASDAQ:CTXS), Marvell Technology Group Ltd. (NASDAQ:MRVL), Expeditors International of Washington, Inc. (NASDAQ:EXPD), and Apache Corporation (NYSE:APA). This group of stocks' market valuations resemble GDDY's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CTXS,34,2131744,-2 MRVL,32,1469427,-3 EXPD,30,511934,6 APA,28,616390,-1 Average,31,1182374,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $1182 million. That figure was $2822 million in GDDY's case. Citrix Systems, Inc. (NASDAQ:CTXS) is the most popular stock in this table. On the other hand Apache Corporation (NYSE:APA) is the least popular one with only 28 bullish hedge fund positions. Compared to these stocks Godaddy Inc (NYSE:GDDY) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately GDDY wasn't nearly as popular as these 20 stocks and hedge funds that were betting on GDDY were disappointed as the stock returned -1.8% during the same 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 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.