Gogo Inc (GOGO): Hedge Funds Are Taking Some Chips Off The Table

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Gogo Inc (NASDAQ:GOGO) and determine whether hedge funds skillfully traded this stock.

Is Gogo Inc (NASDAQ:GOGO) the right investment to pursue these days? The smart money was in a pessimistic mood. The number of long hedge fund positions retreated by 1 in recent months. Gogo Inc (NASDAQ:GOGO) was in 18 hedge funds’ portfolios at the end of June. The all time high for this statistics is 22. Our calculations also showed that GOGO isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

To the average investor there are several gauges market participants employ to assess their holdings. A pair of the most underrated gauges are hedge fund and insider trading activity. We have shown that, historically, those who follow the best picks of the elite money managers can outperform the broader indices by a significant amount (see the details here).

Richard Driehaus of Driehaus Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Now let’s take a look at the recent hedge fund action surrounding Gogo Inc (NASDAQ:GOGO).

How have hedgies been trading Gogo Inc (NASDAQ:GOGO)?

Heading into the third quarter of 2020, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards GOGO over the last 20 quarters. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

Is GOGO A Good Stock To Buy?

The largest stake in Gogo Inc (NASDAQ:GOGO) was held by Mudrick Capital Management, which reported holding $27.6 million worth of stock at the end of September. It was followed by Tenzing Global Investors with a $7.9 million position. Other investors bullish on the company included Senator Investment Group, Renaissance Technologies, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Mudrick Capital Management allocated the biggest weight to Gogo Inc (NASDAQ:GOGO), around 9.33% of its 13F portfolio. Tenzing Global Investors is also relatively very bullish on the stock, designating 3.88 percent of its 13F equity portfolio to GOGO.

Seeing as Gogo Inc (NASDAQ:GOGO) has faced a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of hedge funds that elected to cut their entire stakes last quarter. Interestingly, Richard Driehaus’s Driehaus Capital cut the biggest stake of all the hedgies followed by Insider Monkey, worth close to $5.5 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund dumped about $4.5 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 1 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Gogo Inc (NASDAQ:GOGO) but similarly valued. These stocks are GrowGeneration Corp. (NASDAQ:GRWG), Silicom Ltd. (NASDAQ:SILC), Pulse Biosciences, Inc (NASDAQ:PLSE), Waitr Holdings Inc. (NASDAQ:WTRH), ObsEva SA (NASDAQ:OBSV), Genco Shipping & Trading Limited (NYSE:GNK), and Itamar Medical Ltd. (NASDAQ:ITMR). All of these stocks’ market caps match GOGO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GRWG 11 26167 5
SILC 5 8349 0
PLSE 2 395 0
WTRH 17 65956 10
OBSV 11 36838 3
GNK 11 129661 -1
ITMR 10 37324 2
Average 9.6 43527 2.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.6 hedge funds with bullish positions and the average amount invested in these stocks was $44 million. That figure was $64 million in GOGO’s case. Waitr Holdings Inc. (NASDAQ:WTRH) is the most popular stock in this table. On the other hand Pulse Biosciences, Inc (NASDAQ:PLSE) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Gogo Inc (NASDAQ:GOGO) is more popular among hedge funds. Our overall hedge fund sentiment score for GOGO is 78.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 24.8% in 2020 through the end of September but still managed to beat the market by 19.3 percentage points. Hedge funds were also right about betting on GOGO as the stock returned 192.4% since the end of June and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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