Hedge Funds Are Disconnecting From Gogo Inc (GOGO)

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Gogo Inc (NASDAQ:GOGO).

Gogo Inc (NASDAQ:GOGO) investors should be aware of a decrease in hedge fund sentiment of late. Our calculations also showed that GOGO isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

At the moment there are dozens of gauges stock market investors use to size up stocks. A duo of the most underrated gauges are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the best money managers can outperform the broader indices by a healthy amount (see the details here).

Thomas Sandell

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s review the fresh hedge fund action regarding Gogo Inc (NASDAQ:GOGO).

How are hedge funds trading Gogo Inc (NASDAQ:GOGO)?

Heading into the second quarter of 2020, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from one quarter earlier. By comparison, 12 hedge funds held shares or bullish call options in GOGO 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.

Is GOGO A Good Stock To Buy?

Among these funds, Mudrick Capital Management held the most valuable stake in Gogo Inc (NASDAQ:GOGO), which was worth $18.5 million at the end of the third quarter. On the second spot was Senator Investment Group which amassed $6.5 million worth of shares. Renaissance Technologies, Tenzing Global Investors, and Arrowstreet Capital 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 Mudrick Capital Management allocated the biggest weight to Gogo Inc (NASDAQ:GOGO), around 22.65% of its 13F portfolio. Tenzing Global Investors is also relatively very bullish on the stock, dishing out 1.64 percent of its 13F equity portfolio to GOGO.

Judging by the fact that Gogo Inc (NASDAQ:GOGO) has experienced a decline in interest from the smart money, it’s safe to say that there is a sect of hedgies that elected to cut their entire stakes last quarter. Interestingly, Michael Kahan and Jeremy Kahan’s North Peak Capital said goodbye to the largest position of the “upper crust” of funds followed by Insider Monkey, totaling about $40 million in stock, and Doug Silverman and Alexander Klabin’s Senator Investment Group was right behind this move, as the fund cut about $1.3 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 3 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Gogo Inc (NASDAQ:GOGO). We will take a look at Vista Oil & Gas, S.A.B. de C.V. (NYSE:VIST), Cresud Sociedad Anonima Comercial, Inmobiliaria, Financiera y Agropecuaria (NASDAQ:CRESY), Capital Bancorp, Inc. (NASDAQ:CBNK), and P.A.M. Transportation Services, Inc. (NASDAQ:PTSI). This group of stocks’ market caps are similar to GOGO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VIST 7 27464 0
CRESY 7 9698 1
CBNK 2 511 0
PTSI 1 11629 0
Average 4.25 12326 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 4.25 hedge funds with bullish positions and the average amount invested in these stocks was $12 million. That figure was $40 million in GOGO’s case. Vista Oil & Gas, S.A.B. de C.V. (NYSE:VIST) is the most popular stock in this table. On the other hand P.A.M. Transportation Services, Inc. (NASDAQ:PTSI) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Gogo Inc (NASDAQ:GOGO) is more popular among hedge funds. 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 13.4% in 2020 through June 22nd but still managed to beat the market by 15.9 percentage points. Hedge funds were also right about betting on GOGO, though not to the same extent, as the stock returned 24.1% in Q2 (through June 22nd) and outperformed the market as well.

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