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Hedge Funds Never Been Less Bullish On GameStop Corp. (GME)

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. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. What do these smart investors think about GameStop Corp. (NYSE:GME)?

GameStop Corp. (NYSE:GME) was in 17 hedge funds’ portfolios at the end of March. GME shareholders have witnessed a decrease in enthusiasm from smart money recently. There were 20 hedge funds in our database with GME holdings at the end of the previous quarter. Our calculations also showed that GME 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 Burry Scion Capital

Michael Burry of Scion Asset Management

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. Now let’s go over the key hedge fund action surrounding GameStop Corp. (NYSE:GME).

How have hedgies been trading GameStop Corp. (NYSE:GME)?

At Q1’s end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -15% from the previous quarter. The graph below displays the number of hedge funds with bullish position in GME over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Lee Ainslie’s Maverick Capital has the most valuable position in GameStop Corp. (NYSE:GME), worth close to $13.3 million, amounting to 0.3% of its total 13F portfolio. The second largest stake is held by Scion Asset Management, managed by Michael Burry, which holds a $10.5 million position; the fund has 12.2% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions consist of David Paradice’s Paradice Investment Management, D. E. Shaw’s D E Shaw and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Scion Asset Management allocated the biggest weight to GameStop Corp. (NYSE:GME), around 12.23% of its 13F portfolio. Paradice Investment Management is also relatively very bullish on the stock, dishing out 0.75 percent of its 13F equity portfolio to GME.

Because GameStop Corp. (NYSE:GME) has witnessed declining sentiment from the smart money, we can see that there was a specific group of hedgies that decided to sell off their full holdings last quarter. Intriguingly, Israel Englander’s Millennium Management said goodbye to the biggest position of all the hedgies tracked by Insider Monkey, totaling about $6.9 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also cut its stock, about $2.6 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 3 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to GameStop Corp. (NYSE:GME). These stocks are Entercom Communications Corp. (NYSE:ETM), Tellurian Inc. (NASDAQ:TELL), SC Health Corporation (NYSE:SCPE), and Jumia Technologies AG (NYSE:JMIA). This group of stocks’ market valuations resemble GME’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ETM 17 13101 -6
TELL 6 1521 -5
SCPE 16 57393 -1
JMIA 6 7689 0
Average 11.25 19926 -3

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 $20 million. That figure was $43 million in GME’s case. Entercom Communications Corp. (NYSE:ETM) is the most popular stock in this table. On the other hand Tellurian Inc. (NASDAQ:TELL) is the least popular one with only 6 bullish hedge fund positions. GameStop Corp. (NYSE:GME) is not the most popular stock in this group but hedge fund interest is still above average. 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 beat the market by 15.9 percentage points. Hedge funds were also right about betting on GME as the stock returned 39.3% in Q2 (through June 22nd) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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