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Were Hedge Funds Right About Piling Into Gogo Inc (GOGO)?

Nina Todic

We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds' top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Gogo Inc (NASDAQ:GOGO).

Is Gogo Inc (NASDAQ:GOGO) the right investment to pursue these days? The best stock pickers are becoming hopeful. The number of bullish hedge fund bets rose by 3 in recent months. Our calculations also showed that GOGO isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

MILLENNIUM MANAGEMENT

Unlike other investors who track every movement of the 25 largest hedge funds, our long-short investment strategy relies on hedge fund buy/sell signals given by the 100 best performing hedge funds. We're going to take a glance at the key hedge fund action surrounding Gogo Inc (NASDAQ:GOGO).

How have hedgies been trading Gogo Inc (NASDAQ:GOGO)?

At the end of the second quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards GOGO over the last 16 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with GOGO Positions

Of the funds tracked by Insider Monkey, North Peak Capital, managed by Michael Kahan and Jeremy Kahan, holds the most valuable position in Gogo Inc (NASDAQ:GOGO). North Peak Capital has a $13.5 million position in the stock, comprising 7.6% of its 13F portfolio. Sitting at the No. 2 spot is Stelliam Investment Management, led by Ross Margolies, holding a $13.2 million position; the fund has 3.3% of its 13F portfolio invested in the stock. Other peers that hold long positions consist of David Gallo's Valinor Management LLC, Chet Kapoor's Tenzing Global Investors and Israel Englander's Millennium Management.

As aggregate interest increased, some big names have jumped into Gogo Inc (NASDAQ:GOGO) headfirst. Carlson Capital, managed by Clint Carlson, assembled the most valuable position in Gogo Inc (NASDAQ:GOGO). Carlson Capital had $2.4 million invested in the company at the end of the quarter. Marc Majzner's Clearline Capital also made a $0.3 million investment in the stock during the quarter. The other funds with brand new GOGO positions are Steve Cohen's Point72 Asset Management, John Overdeck and David Siegel's Two Sigma Advisors, and Michael Gelband's ExodusPoint Capital.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Gogo Inc (NASDAQ:GOGO) but similarly valued. We will take a look at Chuy's Holdings Inc (NASDAQ:CHUY), Gladstone Investment Corporation (NASDAQ:GAIN), AVROBIO, Inc. (NASDAQ:AVRO), and Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN). This group of stocks' market valuations are similar to GOGO's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CHUY,12,18664,2 GAIN,4,1798,-3 AVRO,9,54946,5 ACHN,14,63433,0 Average,9.75,34710,1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $35 million. That figure was $66 million in GOGO's case. Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN) is the most popular stock in this table. On the other hand Gladstone Investment Corporation (NASDAQ:GAIN) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Gogo Inc (NASDAQ:GOGO) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on GOGO as the stock returned 51.5% during Q3 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

Disclosure: None. This article was originally published at Insider Monkey.

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