Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in GoodRx Holdings, Inc. (NASDAQ:GDRX)? The smart money sentiment can provide an answer to this question.
Is GDRX a good stock to buy now? Investors who are in the know were taking an optimistic view. The number of long hedge fund bets advanced by 41 lately. GoodRx Holdings, Inc. (NASDAQ:GDRX) was in 41 hedge funds’ portfolios at the end of September. Our calculations also showed that GDRX isn’t among the 30 most popular stocks among hedge funds (click for Q3 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 66 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let’s take a gander at the recent hedge fund action regarding GoodRx Holdings, Inc. (NASDAQ:GDRX).
Do Hedge Funds Think GDRX Is A Good Stock To Buy Now?
At third quarter’s end, a total of 41 of the hedge funds tracked by Insider Monkey were long this stock, a change of 41 from the second quarter of 2020. On the other hand, there were a total of 0 hedge funds with a bullish position in GDRX 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.
Among these funds, Silver Lake Partners held the most valuable stake in GoodRx Holdings, Inc. (NASDAQ:GDRX), which was worth $168.5 million at the end of the third quarter. On the second spot was Light Street Capital which amassed $98.9 million worth of shares. Tiger Global Management LLC, D1 Capital Partners, and Millennium Management 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 Miura Global Management allocated the biggest weight to GoodRx Holdings, Inc. (NASDAQ:GDRX), around 8.91% of its 13F portfolio. Light Street Capital is also relatively very bullish on the stock, dishing out 3.11 percent of its 13F equity portfolio to GDRX.
As industrywide interest jumped, key money managers were breaking ground themselves. Silver Lake Partners, managed by Jim Davidson, Dave Roux and Glenn Hutchins, created the biggest position in GoodRx Holdings, Inc. (NASDAQ:GDRX). Silver Lake Partners had $168.5 million invested in the company at the end of the quarter. Glen Kacher’s Light Street Capital also initiated a $98.9 million position during the quarter. The following funds were also among the new GDRX investors: Chase Coleman’s Tiger Global Management LLC, Daniel Sundheim’s D1 Capital Partners, and Israel Englander’s Millennium Management.
Let’s check out hedge fund activity in other stocks similar to GoodRx Holdings, Inc. (NASDAQ:GDRX). We will take a look at Barclays PLC (NYSE:BCS), Dollar Tree, Inc. (NASDAQ:DLTR), Tyson Foods, Inc. (NYSE:TSN), Schlumberger Limited. (NYSE:SLB), Corteva, Inc. (NYSE:CTVA), GSX Techedu Inc. (NYSE:GSX), and Weyerhaeuser Co. (NYSE:WY). This group of stocks’ market valuations resemble GDRX’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.3 hedge funds with bullish positions and the average amount invested in these stocks was $788 million. That figure was $698 million in GDRX’s case. Schlumberger Limited. (NYSE:SLB) is the most popular stock in this table. On the other hand Barclays PLC (NYSE:BCS) is the least popular one with only 6 bullish hedge fund positions. GoodRx Holdings, Inc. (NASDAQ:GDRX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GDRX is 69.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and beat the market again by 15.8 percentage points. Unfortunately GDRX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on GDRX were disappointed as the stock returned -19% since the end of September (through 12/14) 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.