Due to lower-than-expected guidance for the third quarter, Glu Mobile Inc. (NASDAQ:GLUU)’s stock lost 19% at a point today, after reporting its second quarter performance after markets closed on Tuesday. Despite reporting non-GAAP revenue of $57.5 million, which increased 64% year-over-year, and a net profit of $0.01 per share, up from a loss of $0.02 posted a year earlier, the market reacted negatively to the forecast of $58 million to $60 million in revenues and loss per share range guidance between $0.02 to $0.00 for the third quarter that the firm announced. This is significantly under the consensus of $73 million in revenues and $0.04 earnings per share. Furthermore, the game maker also said that it is expecting EBITDA between -$1 million to $1 million, also below the consensus of $12 million.
Notwithstanding the decline today, hedge funds were bullish on Glu Mobile Inc. (NASDAQ:GLUU) in the first three months of the year. We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular stock picks in real time since the end of August 2012. These stocks have returned 123.1% since then and outperformed the S&P500 Index by 66.5 percentage points (see more details here). That’s why we believe it is important to pay attention to hedge fund sentiment.
Insider trading is another area Insider Monkey looks at, precisely because this can give us an idea whether insiders are confident enough in their companies to acquire shares. Tencent Holdings, which has a chair on Glu Mobile Inc. (NASDAQ:GLUU)’s board, boosted its stake by 8.5 million shares on June 3. On the opposite side of the coin is President and Chief Executive Officer Niccolo de Masi, who sold 457,408 shares on June 1. Keeping these in mind, let’s take a look at the recent hedge fund activity involving Glu Mobile Inc.