Is Gogo Inc (GOGO) Going To Burn These Hedge Funds ?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4 years and analyze what the smart money thinks of Gogo Inc (NASDAQ:GOGO) based on that data.

Gogo Inc (NASDAQ:GOGO) has seen an increase in support from the world’s most elite money managers recently. GOGO was in 17 hedge funds’ portfolios at the end of the third quarter of 2019. There were 15 hedge funds in our database with GOGO holdings at the end of the previous quarter. Our calculations also showed that GOGO isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Mario Gabelli of GAMCO Investors

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. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to review the fresh hedge fund action surrounding Gogo Inc (NASDAQ:GOGO).

Hedge fund activity in Gogo Inc (NASDAQ:GOGO)

At Q3’s end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from the previous quarter. On the other hand, there were a total of 15 hedge funds with a bullish position in GOGO a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

The largest stake in Gogo Inc (NASDAQ:GOGO) was held by North Peak Capital, which reported holding $35.4 million worth of stock at the end of September. It was followed by Valinor Management with a $17.4 million position. Other investors bullish on the company included Tenzing Global Investors, GAMCO Investors, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position North Peak Capital allocated the biggest weight to Gogo Inc (NASDAQ:GOGO), around 15.21% of its 13F portfolio. Tenzing Global Investors is also relatively very bullish on the stock, designating 7.21 percent of its 13F equity portfolio to GOGO.

As industrywide interest jumped, key money managers were leading the bulls’ herd. Renaissance Technologies, assembled the most outsized position in Gogo Inc (NASDAQ:GOGO). Renaissance Technologies had $5.1 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $2.1 million investment in the stock during the quarter. The other funds with brand new GOGO positions are Peter Muller’s PDT Partners, Paul Tudor Jones’s Tudor Investment Corp, and Cliff Asness’s AQR Capital Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Gogo Inc (NASDAQ:GOGO) but similarly valued. We will take a look at China Yuchai International Limited (NYSE:CYD), Ennis, Inc. (NYSE:EBF), OrthoPediatrics Corp. (NASDAQ:KIDS), and Synthorx, Inc. (NASDAQ:THOR). This group of stocks’ market caps resemble GOGO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CYD 9 55431 0
EBF 11 68783 -1
KIDS 7 31059 -1
THOR 7 280891 0
Average 8.5 109041 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $109 million. That figure was $104 million in GOGO’s case. Ennis, Inc. (NYSE:EBF) is the most popular stock in this table. On the other hand OrthoPediatrics Corp. (NASDAQ:KIDS) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Gogo Inc (NASDAQ:GOGO) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately GOGO wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on GOGO were disappointed as the stock returned -16.1% during the first two months of the fourth 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 70 percent of these stocks already outperformed the market in Q4.

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