Did Hedge Funds Drop The Ball On Glu Mobile Inc. (GLUU) ?

During the fourth quarter the Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by nearly 7 percentage points as investors worried over the possible ramifications of rising interest rates. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only 298 S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Glu Mobile Inc. (NASDAQ:GLUU) and see how the stock is affected by the recent hedge fund activity.

Glu Mobile Inc. (NASDAQ:GLUU) was in 20 hedge funds’ portfolios at the end of the fourth quarter of 2018. GLUU investors should be aware of a decrease in enthusiasm from smart money of late. There were 22 hedge funds in our database with GLUU positions at the end of the previous quarter. Our calculations also showed that gluu isn’t among the 30 most popular stocks among hedge funds.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

D. E. Shaw

Let’s take a peek at the key hedge fund action encompassing Glu Mobile Inc. (NASDAQ:GLUU).

What have hedge funds been doing with Glu Mobile Inc. (NASDAQ:GLUU)?

At Q4’s end, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from one quarter earlier. On the other hand, there were a total of 12 hedge funds with a bullish position in GLUU a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with GLUU Positions

More specifically, Citadel Investment Group was the largest shareholder of Glu Mobile Inc. (NASDAQ:GLUU), with a stake worth $31.1 million reported as of the end of December. Trailing Citadel Investment Group was Millennium Management, which amassed a stake valued at $18.5 million. Columbus Circle Investors, D E Shaw, and Renaissance Technologies were also very fond of the stock, giving the stock large weights in their portfolios.

Because Glu Mobile Inc. (NASDAQ:GLUU) has faced a decline in interest from the smart money, we can see that there was a specific group of funds that elected to cut their full holdings heading into Q3. Interestingly, Jason Karp’s Tourbillon Capital Partners sold off the largest investment of the 700 funds tracked by Insider Monkey, totaling about $9.3 million in stock. Marcelo Desio’s fund, Lucha Capital Management, also said goodbye to its stock, about $7.5 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 2 funds heading into Q3.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Glu Mobile Inc. (NASDAQ:GLUU) but similarly valued. We will take a look at Loral Space & Communications Inc. (NASDAQ:LORL), Natus Medical Inc (NASDAQ:BABY), Hertz Global Holdings, Inc. (NYSE:HTZ), and Tompkins Financial Corporation (NYSEAMEX:TMP). This group of stocks’ market values are similar to GLUU’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LORL 18 564857 -4
BABY 15 96498 -4
HTZ 23 783285 -3
TMP 4 13449 -3
Average 15 364522 -3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $365 million. That figure was $108 million in GLUU’s case. Hertz Global Holdings, Inc. (NYSE:HTZ) is the most popular stock in this table. On the other hand Tompkins Financial Corporation (NYSEAMEX:TMP) is the least popular one with only 4 bullish hedge fund positions. Glu Mobile Inc. (NASDAQ:GLUU) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on GLUU as the stock returned 34.4% and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

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