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 the smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Green Dot Corporation (NYSE:GDOT)? The smart money sentiment can provide an answer to this question.
Is GDOT a good stock to buy? Green Dot Corporation (NYSE:GDOT) was in 23 hedge funds’ portfolios at the end of September. The all time high for this statistic is 32. GDOT investors should be aware of an increase in hedge fund interest of late. There were 22 hedge funds in our database with GDOT positions at the end of the second quarter. Our calculations also showed that GDOT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Paul Reeder of PAR Capital Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we’re going to check out the key hedge fund action encompassing Green Dot Corporation (NYSE:GDOT).
Do Hedge Funds Think GDOT Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GDOT over the last 25 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
More specifically, Starboard Value LP was the largest shareholder of Green Dot Corporation (NYSE:GDOT), with a stake worth $266.5 million reported as of the end of September. Trailing Starboard Value LP was Brahman Capital, which amassed a stake valued at $77.6 million. No Street Capital, PAR Capital Management, and Greenhouse Funds 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 No Street Capital allocated the biggest weight to Green Dot Corporation (NYSE:GDOT), around 8.37% of its 13F portfolio. Brahman Capital is also relatively very bullish on the stock, earmarking 5.68 percent of its 13F equity portfolio to GDOT.
Consequently, some big names have jumped into Green Dot Corporation (NYSE:GDOT) headfirst. Divisar Capital, managed by Steven Baughman, created the biggest position in Green Dot Corporation (NYSE:GDOT). Divisar Capital had $7.7 million invested in the company at the end of the quarter. Ira Unschuld’s Brant Point Investment Management also initiated a $2 million position during the quarter. The other funds with brand new GDOT positions are Renaissance Technologies and Karim Abbadi and Edward McBride’s Centiva Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Green Dot Corporation (NYSE:GDOT) but similarly valued. These stocks are Domtar Corporation (NYSE:UFS), Enovix Corporation (NASDAQ:ENVX), First Bancorp (NYSE:FBP), Cadence Bancorporation (NYSE:CADE), Yelp Inc (NYSE:YELP), American Equity Investment Life Holding Company (NYSE:AEL), and United Natural Foods, Inc. (NASDAQ:UNFI). This group of stocks’ market values are similar to GDOT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UFS | 21 | 355182 | -8 |
| ENVX | 23 | 661835 | 23 |
| FBP | 26 | 253717 | 1 |
| CADE | 24 | 113674 | -1 |
| YELP | 26 | 534890 | -1 |
| AEL | 20 | 170592 | 0 |
| UNFI | 19 | 92199 | 4 |
| Average | 22.7 | 311727 | 2.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.7 hedge funds with bullish positions and the average amount invested in these stocks was $312 million. That figure was $576 million in GDOT’s case. First Bancorp (NYSE:FBP) is the most popular stock in this table. On the other hand United Natural Foods, Inc. (NASDAQ:UNFI) is the least popular one with only 19 bullish hedge fund positions. Green Dot Corporation (NYSE:GDOT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GDOT is 56.1. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 31.1% in 2021 through December 9th and beat the market again by 5.1 percentage points. Unfortunately GDOT wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on GDOT were disappointed as the stock returned -27.8% since the end of September (through 12/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
