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Is Gogo Inc (GOGO) A Good Stock To Buy?

Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on small companies, which makes it hard for an individual investor to pin down a ‘winner’ within the small-cap collection of stocks. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and unlimited resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.

Gogo Inc (NASDAQ:GOGO) shareholders have witnessed an increase in support from the world’s most elite money managers lately. At the end of this article we will also compare GOGO to other stocks, including Olin Corporation (NYSE:OLN), Shutterfly, Inc. (NASDAQ:SFLY), and Talen Energy Corp (NYSE:TLN) to get a better sense of its popularity.

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If you’d ask most traders, hedge funds are perceived as slow, old financial vehicles of years past. While there are over 8000 funds in operation today, we look at the moguls of this group, around 700 funds. These investment experts shepherd the majority of the hedge fund industry’s total asset base, and by monitoring their highest performing equity investments, Insider Monkey has discovered several investment strategies that have historically outpaced the market. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points a year for a decade in their back tests.

Now, we’re going to take a look at the recent action surrounding Gogo Inc (NASDAQ:GOGO).

Hedge fund activity in Gogo Inc (NASDAQ:GOGO)

At the Q3’s end, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, an increase of 13% from the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Stelliam Investment Management, managed by Ross Margolies, holds the largest position in Gogo Inc (NASDAQ:GOGO). Stelliam Investment Management has a $70.6 million position in the stock, comprising 1.8% of its 13F portfolio. The second largest stake is held by Jericho Capital Asset Management, managed by Josh Resnick, which holds a $44.9 million position; 2.8% of its 13F portfolio is allocated to the company. Some other members of the smart money with similar optimism consist of David Gallo’s Valinor Management LLC, and Mario Gabelli’s GAMCO Investors.

Consequently, key hedge funds have jumped into Gogo Inc (NASDAQ:GOGO) headfirst. Bruce Kovner’s Caxton Associates LP initiated a $1.5 million position during the third quarter. The following funds were also among the new GOGO investors: Glenn Russell Dubin’s Highbridge Capital Management, Matthew Tewksbury’s Stevens Capital Management, and Michael Platt and William Reeves’s BlueCrest Capital Mgmt..

Let’s go over hedge fund activity in other stocks similar to Gogo Inc (NASDAQ:GOGO). These stocks are Olin Corporation (NYSE:OLN), Shutterfly, Inc. (NASDAQ:SFLY), Talen Energy Corp (NYSE:TLN), and Premier Inc (NASDAQ:PINC). This group of stocks’ market valuations are closest to GOGO’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
OLN 35 485546 11
SFLY 27 413855 0
TLN 20 89283 1
PINC 17 194452 0

As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $296 million. That figure was $167 million in GOGO’s case. Olin Corporation (NYSE:OLN) is the most popular stock in this table, while Gogo Inc (NASDAQ:GOGO), even though it is not the least popular stock in this group, the hedge fund interest towards the stock is still below average. Summing up, we have two slightly negative signals and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard OLN might be a better candidate to consider a long position.

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