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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.
Is Groupon Inc (NASDAQ:GRPN) a bargain? The best stock pickers were taking an optimistic view. The number of long hedge fund bets increased by 3 recently. Groupon Inc (NASDAQ:GRPN) was in 28 hedge funds' portfolios at the end of June. The all time high for this statistic is 33. Our calculations also showed that GRPN isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).
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 79 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Paul Reeder of PAR Capital Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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 gander at the recent hedge fund action encompassing Groupon Inc (NASDAQ:GRPN).
Do Hedge Funds Think GRPN Is A Good Stock To Buy Now?
At Q2's end, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 12% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in GRPN over the last 24 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
More specifically, PAR Capital Management was the largest shareholder of Groupon Inc (NASDAQ:GRPN), with a stake worth $59.1 million reported as of the end of June. Trailing PAR Capital Management was MIG Capital, which amassed a stake valued at $58.5 million. D E Shaw, Citadel Investment Group, and Prentice Capital Management 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 Prentice Capital Management allocated the biggest weight to Groupon Inc (NASDAQ:GRPN), around 7.38% of its 13F portfolio. MIG Capital is also relatively very bullish on the stock, earmarking 5.18 percent of its 13F equity portfolio to GRPN.
As industrywide interest jumped, key hedge funds were breaking ground themselves. PDT Partners, managed by Peter Muller, created the most valuable position in Groupon Inc (NASDAQ:GRPN). PDT Partners had $4.7 million invested in the company at the end of the quarter. Ira Unschuld's Brant Point Investment Management also made a $4.3 million investment in the stock during the quarter. The following funds were also among the new GRPN investors: Ira Unschuld's Brant Point Investment Management, Lee Ainslie's Maverick Capital, and Michael Gelband's ExodusPoint Capital.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Groupon Inc (NASDAQ:GRPN) but similarly valued. We will take a look at Nautilus Biotechnology Inc (NASDAQ:NAUT), Playa Hotels & Resorts N.V. (NASDAQ:PLYA), Gogo Inc (NASDAQ:GOGO), Southside Bancshares, Inc. (NASDAQ:SBSI), Hawaiian Holdings, Inc. (NASDAQ:HA), Clear Channel Outdoor Holdings, Inc. (NYSE:CCO), and Tabula Rasa HealthCare, Inc. (NASDAQ:TRHC). All of these stocks' market caps are closest to GRPN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NAUT,20,185115,2 PLYA,31,324663,5 GOGO,22,180033,4 SBSI,8,40028,1 HA,16,63664,0 CCO,27,253209,-2 TRHC,4,15108,-3 Average,18.3,151689,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.3 hedge funds with bullish positions and the average amount invested in these stocks was $152 million. That figure was $321 million in GRPN's case. Playa Hotels & Resorts N.V. (NASDAQ:PLYA) is the most popular stock in this table. On the other hand Tabula Rasa HealthCare, Inc. (NASDAQ:TRHC) is the least popular one with only 4 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. Our overall hedge fund sentiment score for GRPN is 77.9. 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. 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 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 29.6% in 2021 through November 5th and beat the market again by 3.1 percentage points. Unfortunately GRPN wasn't nearly as popular as these 5 stocks and hedge funds that were betting on GRPN were disappointed as the stock returned -40.8% since the end of June (through 11/5) 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 many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.