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Hedge Funds Are Selling Grid Dynamics Holdings, Inc. (GDYN)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Grid Dynamics Holdings, Inc. (NASDAQ:GDYN) and determine whether the smart money was really smart about this stock.

Grid Dynamics Holdings, Inc. (NASDAQ:GDYN) has experienced a decrease in enthusiasm from smart money recently. Our calculations also showed that GDYN 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.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Michael Stark Crosslink Capital

Michael Stark of Crosslink Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s view the key hedge fund action surrounding Grid Dynamics Holdings, Inc. (NASDAQ:GDYN).

How are hedge funds trading Grid Dynamics Holdings, Inc. (NASDAQ:GDYN)?

Heading into the second quarter of 2020, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards GDYN over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Driehaus Capital was the largest shareholder of Grid Dynamics Holdings, Inc. (NASDAQ:GDYN), with a stake worth $18.3 million reported as of the end of September. Trailing Driehaus Capital was BlueCrest Capital Mgmt., which amassed a stake valued at $16.6 million. Magnetar Capital, MSDC Management, and BlueCrest Capital Mgmt. 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 MSDC Management allocated the biggest weight to Grid Dynamics Holdings, Inc. (NASDAQ:GDYN), around 2.12% of its 13F portfolio. BlueCrest Capital Mgmt. is also relatively very bullish on the stock, setting aside 1.14 percent of its 13F equity portfolio to GDYN.

Due to the fact that Grid Dynamics Holdings, Inc. (NASDAQ:GDYN) has experienced declining sentiment from the smart money, it’s easy to see that there exists a select few money managers that slashed their positions entirely by the end of the first quarter. Interestingly, Spencer M. Waxman’s Shannon River Fund Management said goodbye to the largest position of all the hedgies followed by Insider Monkey, comprising close to $7.2 million in stock. David Costen Haley’s fund, HBK Investments, also sold off its stock, about $4.3 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 3 funds by the end of the first quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Grid Dynamics Holdings, Inc. (NASDAQ:GDYN) but similarly valued. We will take a look at Stoneridge, Inc. (NYSE:SRI), BlackRock Resources & Commodities Strategy Trust (NYSE:BCX), Echo Global Logistics, Inc. (NASDAQ:ECHO), and American Software, Inc. (NASDAQ:AMSWA). This group of stocks’ market values match GDYN’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SRI 13 32212 0
BCX 6 1762 4
ECHO 13 26566 1
AMSWA 12 46226 1
Average 11 26692 1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $27 million. That figure was $64 million in GDYN’s case. Stoneridge, Inc. (NYSE:SRI) is the most popular stock in this table. On the other hand BlackRock Resources & Commodities Strategy Trust (NYSE:BCX) is the least popular one with only 6 bullish hedge fund positions. Grid Dynamics Holdings, Inc. (NASDAQ:GDYN) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately GDYN wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on GDYN were disappointed as the stock returned -13.8% during the same time period 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 many of these stocks already outperformed the market so far this year.

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