Is Groupon Inc (NASDAQ:GRPN) ready to rally soon? The smart money is getting less bullish. The number of bullish hedge fund positions dropped by 1 in recent months.
To most traders, hedge funds are assumed to be worthless, old investment vehicles of years past. While there are greater than 8000 funds with their doors open today, we look at the upper echelon of this group, close to 450 funds. It is widely believed that this group oversees the majority of the smart money’s total capital, and by watching their best stock picks, we have discovered a few investment strategies that have historically outperformed the broader indices. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 24 percentage points in 7 months (check out a sample of our picks).
Equally as key, positive insider trading activity is a second way to parse down the marketplace. Obviously, there are plenty of reasons for an insider to cut shares of his or her company, but only one, very simple reason why they would behave bullishly. Various empirical studies have demonstrated the valuable potential of this strategy if you understand what to do (learn more here).
With these “truths” under our belt, we’re going to take a peek at the key action surrounding Groupon Inc (NASDAQ:GRPN).
What does the smart money think about Groupon Inc (NASDAQ:GRPN)?
In preparation for this year, a total of 18 of the hedge funds we track were long in this stock, a change of -5% from one quarter earlier. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their holdings significantly.
When looking at the hedgies we track, Chase Coleman and Feroz Dewan’s Tiger Global Management LLC had the biggest position in Groupon Inc (NASDAQ:GRPN), worth close to $315.9 million, comprising 5.9% of its total 13F portfolio. Sitting at the No. 2 spot is Philippe Laffont of Coatue Management, with a $36.4 million position; 0.6% of its 13F portfolio is allocated to the company. Other hedge funds that hold long positions include Bill Miller’s Legg Mason Capital Management, Pasco Alfaro / Richard Tumure’s Miura Global Management and Christopher Lord’s Criterion Capital.
Since Groupon Inc (NASDAQ:GRPN) has witnessed a declination in interest from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of funds who sold off their positions entirely at the end of the year. It’s worth mentioning that George Soros’s Soros Fund Management dumped the largest position of the 450+ funds we track, valued at about $11.9 million in stock., and Christopher Medlock James of Partner Fund Management was right behind this move, as the fund dumped about $1.7 million worth. These transactions are interesting, as total hedge fund interest fell by 1 funds at the end of the year.
How have insiders been trading Groupon Inc (NASDAQ:GRPN)?
Insider buying is best served when the primary stock in question has experienced transactions within the past half-year. Over the latest 180-day time frame, Groupon Inc (NASDAQ:GRPN) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).
Let’s also review hedge fund and insider activity in other stocks similar to Groupon Inc (NASDAQ:GRPN). These stocks are Zynga Inc (NASDAQ:ZNGA), HomeAway, Inc. (NASDAQ:AWAY), Youku Tudou Inc (ADR) (NYSE:YOKU), AOL, Inc. (NYSE:AOL), and IAC/InterActiveCorp (NASDAQ:IACI). This group of stocks belong to the internet information providers industry and their market caps resemble GRPN’s market cap.
|Company Name||# of Hedge Funds||# of Insiders Buying||# of Insiders Selling|
|Zynga Inc (NASDAQ:ZNGA)||16||1||9|
|HomeAway, Inc. (NASDAQ:AWAY)||9||0||13|
|Youku Tudou Inc (ADR) (NYSE:YOKU)||14||0||0|
|AOL, Inc. (NYSE:AOL)||19||0||4|
With the results exhibited by our research, retail investors should always watch hedge fund and insider trading sentiment, and Groupon Inc (NASDAQ:GRPN) applies perfectly to this mantra.
See the 7 most bullish money managers: