The first quarter was a breeze as Powell pivoted, and China seemed eager to reach a deal with Trump. Both the S&P 500 and Russell 2000 delivered very strong gains as a result, with the Russell 2000, which is composed of smaller companies, outperforming the large-cap stocks slightly during the first quarter. Unfortunately sentiment shifted in May and August as this time China pivoted and Trump put more pressure on China by increasing tariffs. Hedge funds’ top 20 stock picks performed spectacularly in this volatile environment. These stocks delivered a total gain of 24.4% through September 30th, vs. a gain of 20.4% for the S&P 500 ETF. In this article we will look at how this market volatility affected the sentiment of hedge funds towards Gores Metropoulos, Inc. (NASDAQ:GMHI), and what that likely means for the prospects of the company and its stock.
Is Gores Metropoulos, Inc. (NASDAQ:GMHI) a buy right now? Investors who are in the know are in a bullish mood. The number of bullish hedge fund bets improved by 2 in recent months. Our calculations also showed that GMHI isn’t among the 30 most popular stocks among hedge funds (see the video below). GMHI was in 20 hedge funds’ portfolios at the end of June. There were 18 hedge funds in our database with GMHI holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to go over the latest hedge fund action encompassing Gores Metropoulos, Inc. (NASDAQ:GMHI).
What have hedge funds been doing with Gores Metropoulos, Inc. (NASDAQ:GMHI)?
Heading into the third quarter of 2019, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GMHI over the last 16 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.
The largest stake in Gores Metropoulos, Inc. (NASDAQ:GMHI) was held by Arrowgrass Capital Partners, which reported holding $20.9 million worth of stock at the end of March. It was followed by Millennium Management with a $20.3 million position. Other investors bullish on the company included Governors Lane, Element Capital Management, and Magnetar Capital.
As industrywide interest jumped, key hedge funds have been driving this bullishness. Governors Lane, managed by Isaac Corre, established the largest position in Gores Metropoulos, Inc. (NASDAQ:GMHI). Governors Lane had $20.1 million invested in the company at the end of the quarter. David Costen Haley’s HBK Investments also initiated a $7.7 million position during the quarter. The other funds with brand new GMHI positions are Paul Marshall and Ian Wace’s Marshall Wace LLP, Mitch Kuflik and Rob Sobel’s Brahman Capital, and Greg Poole’s Echo Street Capital Management.
Let’s check out hedge fund activity in other stocks similar to Gores Metropoulos, Inc. (NASDAQ:GMHI). These stocks are Meridian Bioscience, Inc. (NASDAQ:VIVO), Teekay Offshore Partners L.P. (NYSE:TOO), Axcelis Technologies Inc (NASDAQ:ACLS), and Star Group, L.P. (NYSE:SGU). This group of stocks’ market valuations match GMHI’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VIVO | 17 | 60699 | 1 |
| TOO | 6 | 2852 | -2 |
| ACLS | 14 | 60419 | -2 |
| SGU | 8 | 97903 | 0 |
| Average | 11.25 | 55468 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $55 million. That figure was $163 million in GMHI’s case. Meridian Bioscience, Inc. (NASDAQ:VIVO) is the most popular stock in this table. On the other hand Teekay Offshore Partners L.P. (NYSE:TOO) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Gores Metropoulos, Inc. (NASDAQ:GMHI) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately GMHI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on GMHI were disappointed as the stock returned 0.3% 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.
