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The Geo Group, Inc. (GEO): Hedge Funds Are Bearish and Insiders Are Undecided, What Should You Do?

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In the eyes of many market players, hedge funds are assumed to be delayed, old investment vehicles of an era lost to time. Although there are over 8,000 hedge funds with their doors open currently, Insider Monkey aim at the elite of this club, about 525 funds. Analysts calculate that this group controls the lion’s share of the hedge fund industry’s total assets, and by paying attention to their best equity investments, we’ve come up with a number of investment strategies that have historically outpaced Mr. Market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points annually 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 outperformed the S&P 500 index by 33 percentage points in 11 months (see all of our picks from August).

Just as key, optimistic insider trading sentiment is a second way to analyze the financial markets. Just as you’d expect, there are a number of incentives for an insider to get rid of shares of his or her company, but just one, very simple reason why they would initiate a purchase. Various empirical studies have demonstrated the useful potential of this strategy if piggybackers know where to look (learn more here).

What’s more, let’s analyze the latest info for The Geo Group, Inc. (NYSE:GEO).

How have hedgies been trading The Geo Group, Inc. (NYSE:GEO)?

At the end of the second quarter, a total of 16 of the hedge funds we track were bullish in this stock, a change of -20% from the previous quarter. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were upping their stakes considerably.

The Geo Group, Inc. (NYSE:GEO)According to our 13F database, Scopia Capital, managed by Matt Sirovich and Jeremy Mindich, holds the biggest position in The Geo Group, Inc. (NYSE:GEO). Scopia Capital has a $239.1 million position in the stock, comprising 6.7% of its 13F portfolio. The second largest stake is held by Renaissance Technologies, managed by Jim Simons, which held a $45.2 million position; 0.1% of its 13F portfolio is allocated to the stock. Other hedge funds that are bullish include Clint Carlson’s Carlson Capital, D. E. Shaw’s D E Shaw and Cliff Asness’s AQR Capital Management.

Because The Geo Group, Inc. (NYSE:GEO) has witnessed bearish sentiment from the smart money’s best and brightest, logic holds that there was a specific group of funds who were dropping their positions entirely heading into Q2. Intriguingly, Timothy S. Peterson’s Regiment Capital dumped the largest investment of the 450+ funds we watch, comprising about $22.4 million in stock. Curtis Schenker and Craig Effron’s fund, Scoggin, also dropped its stock, about $16.3 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 4 funds heading into Q2.

Insider trading activity in The Geo Group, Inc. (NYSE:GEO)

Bullish insider trading is most useful when the company in question has seen transactions within the past six months. Over the latest six-month time frame, The Geo Group, Inc. (NYSE:GEO) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

We’ll go over the relationship between both of these indicators in other stocks similar to The Geo Group, Inc. (NYSE:GEO). These stocks are American Science & Engineering, Inc. (NASDAQ:ASEI), Checkpoint Systems, Inc. (NYSE:CKP), ADT Corp (NYSE:ADT), Ascent Capital Group Inc (NASDAQ:ASCMA), and Brink’S Co (NYSE:BCO). This group of stocks are in the security & protection services industry and their market caps match GEO’s market cap.

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