Were Hedge Funds Right About Buying Global Payments Inc (GPN)?

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Global Payments Inc (NYSE:GPN) and determine whether the smart money was really smart about this stock.

Is Global Payments Inc (NYSE:GPN) a bargain? Investors who are in the know are becoming more confident. The number of bullish hedge fund bets went up by 3 recently. Our calculations also showed that GPN isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

In today’s marketplace there are several gauges investors use to analyze publicly traded companies. A pair of the most useful gauges are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the elite fund managers can outclass the S&P 500 by a healthy amount (see the details here).

COATUE MANAGEMENT

Philippe Laffont of Coatue Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to review the recent hedge fund action surrounding Global Payments Inc (NYSE:GPN).

How have hedgies been trading Global Payments Inc (NYSE:GPN)?

At the end of the first quarter, a total of 67 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the previous quarter. By comparison, 29 hedge funds held shares or bullish call options in GPN a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Lone Pine Capital held the most valuable stake in Global Payments Inc (NYSE:GPN), which was worth $714.6 million at the end of the third quarter. On the second spot was Coatue Management which amassed $270.5 million worth of shares. Alkeon Capital Management, Steadfast Capital Management, and Palestra Capital 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 Value Holdings LP allocated the biggest weight to Global Payments Inc (NYSE:GPN), around 13.75% of its 13F portfolio. Azora Capital is also relatively very bullish on the stock, designating 10.48 percent of its 13F equity portfolio to GPN.

As one would reasonably expect, key hedge funds were breaking ground themselves. Value Holdings LP, managed by Tim Curro, created the biggest position in Global Payments Inc (NYSE:GPN). Value Holdings LP had $28.9 million invested in the company at the end of the quarter. Ravi Chopra’s Azora Capital also made a $27.1 million investment in the stock during the quarter. The other funds with brand new GPN positions are Parsa Kiai’s Steamboat Capital Partners, David Fiszel’s Honeycomb Asset Management, and Dennis Puri and Oliver Keller’s Hunt Lane Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Global Payments Inc (NYSE:GPN) but similarly valued. These stocks are The Charles Schwab Corporation (NYSE:SCHW), The Progressive Corporation (NYSE:PGR), Vale SA (NYSE:VALE), and The Sherwin-Williams Company (NYSE:SHW). This group of stocks’ market valuations are closest to GPN’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SCHW 62 2907493 -8
PGR 51 1505680 3
VALE 28 1111939 2
SHW 57 1511243 2
Average 49.5 1759089 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 49.5 hedge funds with bullish positions and the average amount invested in these stocks was $1759 million. That figure was $2155 million in GPN’s case. The Charles Schwab Corporation (NYSE:SCHW) is the most popular stock in this table. On the other hand Vale SA (NYSE:VALE) is the least popular one with only 28 bullish hedge fund positions. Compared to these stocks Global Payments Inc (NYSE:GPN) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th and still beat the market by 16.8 percentage points. Unfortunately GPN wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on GPN were disappointed as the stock returned 16.3% during the second quarter (through June 25th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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