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Smart Money Ownership Of Groupon Inc (GRPN) Takes A Dive In Q3

There are several ways to beat the market, and investing in small-cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small-cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other elite funds’ exemplary historical records, we pay attention to their small-cap picks. In this article, we use this hedge fund filing data to analyze Groupon Inc (NASDAQ:GRPN).

Is Groupon Inc undervalued? The best stock pickers are getting less optimistic. The number of bullish hedge fund bets shrunk by 8 in recent months. At the end of this article we will also compare Groupon Inc to other stocks including J&J Snack Foods Corp. (NASDAQ:JJSF), NRG Yield, Inc. Class C (NYSE:NYLD), and Esterline Technologies Corporation (NYSE:ESL) to get a better sense of its popularity.

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At the moment there are a multitude of indicators market participants put to use to evaluate stocks. A duo of the less known indicators are hedge fund and insider trading indicators. our researchers have shown that, historically, those who follow the top picks of the top hedge fund managers can outclass their index-focused peers by a superb margin (see the details here).

Now, let’s take a look at the latest action regarding Groupon Inc (NASDAQ:GRPN).

How are hedge funds trading Groupon Inc (NASDAQ:GRPN)?

Heading into Q4, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a decline of 24% from the second quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies has the number one position in Groupon Inc (NASDAQ:GRPN), worth close to $35.1 million, comprising 0.1% of its total 13F portfolio. The second-largest stake is held by Cliff Asness of AQR Capital Management, with a $26.3 million position; 0.1% of his firm’s 13F portfolio is allocated to the stock. Other peers that hold long positions consist of Ken Griffin’s Citadel Investment Group, Israel Englander’s Millennium Management, and George McCabe’s Portolan Capital Management.

Due to the fact that Groupon Inc (NASDAQ:GRPN) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there exists a select few fund managers that elected to cut their positions entirely heading into Q4. At the top of the heap, Leon Cooperman’s Omega Advisors said goodbye to the biggest position of all the hedgies monitored by Insider Monkey, worth about $30.6 million in call options underlying Groupon shares. Michael Platt and William Reeves of BlueCrest Capital Mgmt. was right behind that move, as the fund cut about $6 million worth of shares. These transactions are intriguing to say the least, as total hedge fund interest fell by 8 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks similar to Groupon Inc (NASDAQ:GRPN). We will take a look at J&J Snack Foods Corp. (NASDAQ:JJSF), NRG Yield, Inc. Class C (NYSE:NYLD), Esterline Technologies Corporation (NYSE:ESL), and Parsley Energy Inc (NYSE:PE). This group of stocks’ market caps match GRPN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
JJSF 9 63918 2
NYLD 31 277988 -2
ESL 21 443595 -1
PE 21 422994 -4

As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $302 million. That figure was $136 million in Groupon Inc’s case. NRG Yield, Inc. Class C (NYSE:NYLD) is the most popular stock in this table. On the other hand J&J Snack Foods Corp. (NASDAQ:JJSF) is the least popular one with only 9 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. This is a slightly positive signal but given that ownership is falling fast and the amount of capital invested in the stock is low, it may not be worth considering Groupon for your portfolio at this time.

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