Shares of Chicago-based Groupon Inc (NASDAQ:GRPN) are up by more than 4.95% after an upgrade from Macquarie to ‘Outperform’ from an earlier ‘Neutral’ rating. The price target however was lowered to $7.00 from $7.75, though that still provides an upside of more than 36% from the current trading price of shares. The rationale behind this development was that shares were being oversold and have already fallen to the tune of 29% after the $3.29 billion provider of online discounts delivered its first quarter financial results. Groupon Inc (NASDAQ:GRPN)’s stock is still trading nearly 40% below its 52-week high and has lost about 38% of its value so far this year. This is much worse than the 3.16% average gains that the internet content & information industry has posted during the same time period.
Professional money managers probably realized the oversold nature of the stock, and hence the company saw a rise in interest from hedge funds during the first quarter, at least in terms of overall number of investors. Among the funds that we track, a total of 35 had invested about $419.70 million in Groupon Inc (NASDAQ:GRPN), as compared to 30 firms with $530.09 million at the end of the previous quarter. As you can see, the total value of their holdings did decline by over 20% during the quarter, though the shares fell by over 15% in value, so despite more investors, they collectively owned less shares.
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Another useful indicator of a company’s future prospects is insider trading. However, it must be noted that insider purchases are a much stronger indicator than insider selling, which can occur owing to a large set of reasons. Although no insider purchases have been detected in Groupon Inc (NASDAQ:GRPN) this year, prominent insider selling transactions include that by Director Bradley Keywell, who has disposed of 3.5 million shares so far this year, and by CEO Eric Lefkofsky, who liquidated some 2.27 million shares during the same period.
Let’s look next at the smart money activity in Groupon’s shares.
How have hedgies been trading Groupon Inc (NASDAQ:GRPN)?
Heading into the second quarter, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from one quarter earlier. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were upping their holdings considerably.
According to hedge fund intelligence website Insider Monkey, Eric Bannasch‘s Cadian Capital had the biggest position in Groupon Inc (NASDAQ:GRPN), worth close to $85.4 million, comprising 2.3% of its total 13F portfolio. The second-largest stake was held by Leon Cooperman of Omega Advisors, with an $85.1 million position; 1.4% of his 13F portfolio was allocated to the stock. Some other hedgies that were bullish contain Israel Englander‘s Millennium Management, Jim Simons’ Renaissance Technologies,and Cliff Asness’ AQR Capital Management.
Consequently, specific money managers have been driving this bullishness. Renaissance Technologies, managed by Jim Simons, initiated the most valuable position in Groupon Inc (NASDAQ:GRPN). Renaissance Technologies had $21.7 million invested in the company at the end of the first three months. Glenn Russell Dubin’s Highbridge Capital Management also initiated a $14.1 million position during the first trimester. The other funds with brand new Groupon positions were Peter Muller’s PDT Partners, Michael Platt and William Reeves’ BlueCrest Capital Mgmt., and Noam Gottesman’s GLG Partners.
Some hedge funds clearly felt the price was reasonable to enter the stock in the first quarter, while those with larger positions cautiously trimmed them. Given that shares are down considerably since the end of the first trimester, we believe the stock is now at a reasonable level for investors to enter it, as previously bearish analysts now conclude as well.