Is Groupon Inc (NASDAQ:GRPN) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is GRPN a good stock to buy now? Money managers were getting less bullish. The number of long hedge fund bets went down by 3 recently. Groupon Inc (NASDAQ:GRPN) was in 16 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 33. Our calculations also showed that GRPN 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). There were 19 hedge funds in our database with GRPN positions at the end of the second quarter.
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 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 S&P 500 ETFs by 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 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.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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 analyze the latest hedge fund action regarding Groupon Inc (NASDAQ:GRPN).
Do Hedge Funds Think GRPN Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -16% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards GRPN over the last 21 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, MIG Capital was the largest shareholder of Groupon Inc (NASDAQ:GRPN), with a stake worth $32.6 million reported as of the end of September. Trailing MIG Capital was D E Shaw, which amassed a stake valued at $24.5 million. Renaissance Technologies, PAR Capital Management, and Arrowstreet Capital 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 Prentice Capital Management allocated the biggest weight to Groupon Inc (NASDAQ:GRPN), around 3.74% of its 13F portfolio. MIG Capital is also relatively very bullish on the stock, setting aside 3.32 percent of its 13F equity portfolio to GRPN.
Since Groupon Inc (NASDAQ:GRPN) has witnessed bearish sentiment from hedge fund managers, it’s easy to see that there lies a certain “tier” of funds who were dropping their positions entirely in the third quarter. Intriguingly, John Petry’s Sessa Capital cut the biggest stake of the “upper crust” of funds monitored by Insider Monkey, comprising close to $1.6 million in stock, and Joel Greenblatt’s Gotham Asset Management was right behind this move, as the fund said goodbye to about $0.3 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 3 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Groupon Inc (NASDAQ:GRPN). We will take a look at SpartanNash Company (NASDAQ:SPTN), Ambac Financial Group, Inc. (NYSE:AMBC), HomeStreet Inc (NASDAQ:HMST), Qutoutiao Inc. (NASDAQ:QTT), First Foundation Inc (NASDAQ:FFWM), El Pollo LoCo Holdings Inc (NASDAQ:LOCO), and Premier Financial Corp. (NASDAQ:PFC). This group of stocks’ market values are similar to GRPN’s market value.
|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 11.6 hedge funds with bullish positions and the average amount invested in these stocks was $38 million. That figure was $137 million in GRPN’s case. First Foundation Inc (NASDAQ:FFWM) is the most popular stock in this table. On the other hand Qutoutiao Inc. (NASDAQ:QTT) is the least popular one with only 5 bullish hedge fund positions. Groupon Inc (NASDAQ:GRPN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GRPN is 62.4. 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. 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 still beat the market by 15.8 percentage points. Hedge funds were also right about betting on GRPN as the stock returned 72.8% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.