Were Hedge Funds Right About Goosehead Insurance, Inc. (GSHD)?

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 835 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article we look at what those investors think of Goosehead Insurance, Inc. (NASDAQ:GSHD).

Goosehead Insurance, Inc. (NASDAQ:GSHD) was in 9 hedge funds’ portfolios at the end of the fourth quarter of 2019. GSHD investors should pay attention to a decrease in enthusiasm from smart money lately. There were 10 hedge funds in our database with GSHD positions at the end of the previous quarter. Our calculations also showed that GSHD isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

Dmitry Balyasny of Balyasny Asset Managemnet

Dmitry Balyasny of Balyasny Asset Management

We leave no stone unturned when looking for the next great investment idea. For example, COVID-19 pandemic is still the main driver of stock prices. So we are checking out this trader’s corona catalyst trades. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s check out the new hedge fund action regarding Goosehead Insurance, Inc. (NASDAQ:GSHD).

What have hedge funds been doing with Goosehead Insurance, Inc. (NASDAQ:GSHD)?

Heading into the first quarter of 2020, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards GSHD over the last 18 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.

Is GSHD A Good Stock To Buy?

The largest stake in Goosehead Insurance, Inc. (NASDAQ:GSHD) was held by Zevenbergen Capital Investments, which reported holding $23.6 million worth of stock at the end of September. It was followed by Driehaus Capital with a $9 million position. Other investors bullish on the company included Wildcat Capital Management, Akre Capital Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Wildcat Capital Management allocated the biggest weight to Goosehead Insurance, Inc. (NASDAQ:GSHD), around 2.17% of its 13F portfolio. Zevenbergen Capital Investments is also relatively very bullish on the stock, earmarking 0.87 percent of its 13F equity portfolio to GSHD.

Seeing as Goosehead Insurance, Inc. (NASDAQ:GSHD) has experienced bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of hedgies who sold off their positions entirely by the end of the third quarter. Intriguingly, Israel Englander’s Millennium Management said goodbye to the largest stake of the 750 funds followed by Insider Monkey, valued at about $1.6 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund sold off about $0.9 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 1 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Goosehead Insurance, Inc. (NASDAQ:GSHD) but similarly valued. These stocks are Rambus Inc. (NASDAQ:RMBS), Sykes Enterprises, Incorporated (NASDAQ:SYKE), Osisko Gold Royalties Ltd (NYSE:OR), and Archrock, Inc. (NYSE:AROC). This group of stocks’ market caps match GSHD’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RMBS 19 173795 -5
SYKE 18 98479 4
OR 13 66565 -1
AROC 15 34297 2
Average 16.25 93284 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $93 million. That figure was $54 million in GSHD’s case. Rambus Inc. (NASDAQ:RMBS) is the most popular stock in this table. On the other hand Osisko Gold Royalties Ltd (NYSE:OR) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Goosehead Insurance, Inc. (NASDAQ:GSHD) is even less popular than OR. Hedge funds clearly dropped the ball on GSHD as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 1.0% in 2020 through May 1st but still beat the market by 12.9 percentage points. A small number of hedge funds were also right about betting on GSHD as the stock returned 35.5% during the same time period and outperformed the market by an even larger margin.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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