Hedge Funds Are Coming Back To The Geo Group, Inc. (GEO)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of The Geo Group, Inc. (NYSE:GEO) based on that data and determine whether they were really smart about the stock.

The Geo Group, Inc. (NYSE:GEO) investors should pay attention to an increase in enthusiasm from smart money lately. The Geo Group, Inc. (NYSE:GEO) was in 20 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 23. Our calculations also showed that GEO 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.

In the 21st century investor’s toolkit there are a lot of tools shareholders can use to value stocks. A pair of the most innovative tools are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the elite money managers can trounce the market by a solid amount (see the details here).

Ken Heebner of Capital Growth Management

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 recommended this real estate stock to our monthly premium newsletter subscribers after its stock price crashed. 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 we’re going to check out the fresh hedge fund action surrounding The Geo Group, Inc. (NYSE:GEO).

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

Heading into the third quarter of 2020, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 43% from one quarter earlier. By comparison, 20 hedge funds held shares or bullish call options in GEO a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

Is GEO A Good Stock To Buy?

Among these funds, Arrowstreet Capital held the most valuable stake in The Geo Group, Inc. (NYSE:GEO), which was worth $26.6 million at the end of the third quarter. On the second spot was Miller Value Partners which amassed $9.3 million worth of shares. Intrinsic Edge Capital, Citadel Investment Group, and Two Sigma Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Intrinsic Edge Capital allocated the biggest weight to The Geo Group, Inc. (NYSE:GEO), around 0.66% of its 13F portfolio. AlphaOne Capital Partners is also relatively very bullish on the stock, setting aside 0.53 percent of its 13F equity portfolio to GEO.

With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. Miller Value Partners, managed by Bill Miller, assembled the biggest position in The Geo Group, Inc. (NYSE:GEO). Miller Value Partners had $9.3 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $3.5 million position during the quarter. The other funds with brand new GEO positions are Michael Gelband’s ExodusPoint Capital, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Greg Eisner’s Engineers Gate Manager.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as The Geo Group, Inc. (NYSE:GEO) but similarly valued. These stocks are Meritor Inc (NYSE:MTOR), Enviva Partners, LP (NYSE:EVA), Sunnova Energy International Inc. (NYSE:NOVA), Amneal Pharmaceuticals, Inc. (NYSE:AMRX), Monmouth Real Estate Investment Corp. (NYSE:MNR), Esperion Therapeutics (NASDAQ:ESPR), and Innoviva, Inc. (NASDAQ:INVA). This group of stocks’ market valuations are closest to GEO’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MTOR 18 206794 1
EVA 8 217021 3
NOVA 10 92088 1
AMRX 11 20063 4
MNR 10 60863 -2
ESPR 19 324252 1
INVA 19 293485 0
Average 13.6 173509 1.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.6 hedge funds with bullish positions and the average amount invested in these stocks was $174 million. That figure was $63 million in GEO’s case. Esperion Therapeutics (NASDAQ:ESPR) is the most popular stock in this table. On the other hand Enviva Partners, LP (NYSE:EVA) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks The Geo Group, Inc. (NYSE:GEO) is more popular among hedge funds. Our overall hedge fund sentiment score for GEO is 36.1. 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 gained 24.8% in 2020 through the end of September and still beat the market by 19.3 percentage points. Unfortunately GEO wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on GEO were disappointed as the stock returned -0.2% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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