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Were Hedge Funds Right About Global Payments Inc (GPN)?

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Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don't make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Global Payments Inc (NYSE:GPN) to find out whether there were any major changes in hedge funds' views.

Global Payments Inc (NYSE:GPN) shareholders have witnessed an increase in hedge fund sentiment in recent months. Global Payments Inc (NYSE:GPN) was in 62 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 68. There were 55 hedge funds in our database with GPN holdings at the end of December. Our calculations also showed that GPN isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In the 21st century investor’s toolkit there are several tools market participants put to use to appraise their stock investments. A duo of the most useful tools are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the best fund managers can outpace the market by a significant margin (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

John Armitage Egerton Capital
John Armitage Egerton Capital

John Armitage of Egerton Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, 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. Keeping this in mind we're going to take a peek at the recent hedge fund action regarding Global Payments Inc (NYSE:GPN).

Do Hedge Funds Think GPN Is A Good Stock To Buy Now?

At Q1's end, a total of 62 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from one quarter earlier. By comparison, 67 hedge funds held shares or bullish call options in GPN a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Lone Pine Capital was the largest shareholder of Global Payments Inc (NYSE:GPN), with a stake worth $855.8 million reported as of the end of March. Trailing Lone Pine Capital was Egerton Capital Limited, which amassed a stake valued at $613.9 million. Matrix Capital Management, Alkeon Capital Management, and Coatue 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 Joho Capital allocated the biggest weight to Global Payments Inc (NYSE:GPN), around 18.64% of its 13F portfolio. Jeneq Management is also relatively very bullish on the stock, setting aside 16.36 percent of its 13F equity portfolio to GPN.

As aggregate interest increased, key hedge funds have jumped into Global Payments Inc (NYSE:GPN) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the most outsized position in Global Payments Inc (NYSE:GPN). Marshall Wace LLP had $143.4 million invested in the company at the end of the quarter. Daniel S. Och's OZ Management also initiated a $104.6 million position during the quarter. The other funds with new positions in the stock are Brandon Haley's Holocene Advisors, Brennan Diaz's Fernbridge Capital Management, and Peter Seuss's Prana Capital Management.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Global Payments Inc (NYSE:GPN) but similarly valued. We will take a look at Banco Santander, S.A. (NYSE:SAN), Capital One Financial Corp. (NYSE:COF), Twilio Inc. (NYSE:TWLO), Takeda Pharmaceutical Company Limited (NYSE:TAK), Bank of Montreal (NYSE:BMO), Analog Devices, Inc. (NASDAQ:ADI), and Illumina, Inc. (NASDAQ:ILMN). This group of stocks' market values are similar to GPN's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SAN,15,490548,1 COF,59,3139814,3 TWLO,99,5812460,5 TAK,19,860444,1 BMO,15,204401,4 ADI,50,4860676,-8 ILMN,52,1595824,7 Average,44.1,2423452,1.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 44.1 hedge funds with bullish positions and the average amount invested in these stocks was $2423 million. That figure was $4558 million in GPN's case. Twilio Inc. (NYSE:TWLO) is the most popular stock in this table. On the other hand Banco Santander, S.A. (NYSE:SAN) is the least popular one with only 15 bullish hedge fund positions. Global Payments Inc (NYSE:GPN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GPN is 65.3. 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 25.8% in 2021 through August 6th and beat the market again by 6.7 percentage points. Unfortunately GPN wasn't nearly as popular as these 5 stocks and hedge funds that were betting on GPN were disappointed as the stock returned -12.5% since the end of March (through 8/6) 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.