Hedge Funds Have Never Been This Bullish On The Geo Group, Inc. (GEO)

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the second quarter. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about The Geo Group, Inc. (NYSE:GEO).

The Geo Group, Inc. (NYSE:GEO) has experienced an increase in support from the world’s most elite money managers in recent months. Our calculations also showed that GEO isn’t among the 30 most popular stocks among hedge funds (view video below).
5 Most Popular Stocks Among Hedge Funds
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.

Paul Marshall Marshall Wace

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. Let’s take a gander at the fresh hedge fund action regarding The Geo Group, Inc. (NYSE:GEO).

What have hedge funds been doing with The Geo Group, Inc. (NYSE:GEO)?

At the end of the second quarter, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from one quarter earlier. On the other hand, there were a total of 12 hedge funds with a bullish position in GEO a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with GEO Positions

Among these funds, Capital Growth Management held the most valuable stake in The Geo Group, Inc. (NYSE:GEO), which was worth $35.3 million at the end of the second quarter. On the second spot was Arrowstreet Capital which amassed $27.1 million worth of shares. Moreover, Citadel Investment Group, Renaissance Technologies, and Marshall Wace LLP were also bullish on The Geo Group, Inc. (NYSE:GEO), allocating a large percentage of their portfolios to this stock.

Now, key hedge funds have jumped into The Geo Group, Inc. (NYSE:GEO) headfirst. Saba Capital, managed by Boaz Weinstein, created the biggest position in The Geo Group, Inc. (NYSE:GEO). Saba Capital had $1.1 million invested in the company at the end of the quarter. Mike Vranos’s Ellington also initiated a $0.4 million position during the quarter. The other funds with new positions in the stock are Peter Algert and Kevin Coldiron’s Algert Coldiron Investors, Thomas Bailard’s Bailard Inc, and Minhua Zhang’s Weld Capital Management.

Let’s also examine hedge fund activity in other stocks similar to The Geo Group, Inc. (NYSE:GEO). We will take a look at Taubman Centers, Inc. (NYSE:TCO), Xencor Inc (NASDAQ:XNCR), Meredith Corporation (NYSE:MDP), and Turquoise Hill Resources Ltd (NYSE:TRQ). This group of stocks’ market caps match GEO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TCO 25 150300 11
XNCR 12 269316 -4
MDP 11 271061 0
TRQ 20 666843 3
Average 17 339380 2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $339 million. That figure was $112 million in GEO’s case. Taubman Centers, Inc. (NYSE:TCO) is the most popular stock in this table. On the other hand Meredith Corporation (NYSE:MDP) is the least popular one with only 11 bullish hedge fund positions. The Geo Group, Inc. (NYSE:GEO) 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 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 GEO wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on GEO were disappointed as the stock returned -15.3% 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 so far this year.

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