Where Do Hedge Funds Stand On The Geo Group, Inc. (GEO)?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding The Geo Group, Inc. (NYSE:GEO).

The Geo Group, Inc. (NYSE:GEO) investors should be aware of a decrease in support from the world’s most elite money managers recently. The Geo Group, Inc. (NYSE:GEO) was in 12 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 23. There were 20 hedge funds in our database with GEO holdings at the end of June. Our calculations also showed that GEO 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).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Bill Miller

Bill Miller of Miller Value Partners

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 check out the latest hedge fund action regarding The Geo Group, Inc. (NYSE:GEO).

Do Hedge Funds Think GEO Is A Good Stock To Buy Now?

At the end of September, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -40% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards GEO over the last 21 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

Is GEO A Good Stock To Buy?

Among these funds, Arrowstreet Capital held the most valuable stake in The Geo Group, Inc. (NYSE:GEO), which was worth $27.1 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $9.4 million worth of shares. Miller Value Partners, Intrinsic Edge Capital, and Citadel Investment Group 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 Intrinsic Edge Capital allocated the biggest weight to The Geo Group, Inc. (NYSE:GEO), around 0.57% of its 13F portfolio. Miller Value Partners is also relatively very bullish on the stock, designating 0.32 percent of its 13F equity portfolio to GEO.

Due to the fact that The Geo Group, Inc. (NYSE:GEO) has faced falling interest from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of funds who were dropping their positions entirely in the third quarter. Interestingly, Michael Gelband’s ExodusPoint Capital cut the biggest position of the 750 funds followed by Insider Monkey, worth an estimated $0.5 million in stock. Paul Hondros’s fund, AlphaOne Capital Partners, also said goodbye to its stock, about $0.4 million worth. These transactions are important to note, as total hedge fund interest dropped by 8 funds in the third quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as The Geo Group, Inc. (NYSE:GEO) but similarly valued. These stocks are Sykes Enterprises, Incorporated (NASDAQ:SYKE), Murphy Oil Corporation (NYSE:MUR), LTC Properties Inc (NYSE:LTC), Intercept Pharmaceuticals Inc (NASDAQ:ICPT), Ebang International Holdings Inc. (NASDAQ:EBON), WSFS Financial Corporation (NASDAQ:WSFS), and Knowles Corp (NYSE:KN). This group of stocks’ market caps match GEO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SYKE 13 47344 -5
MUR 24 78785 9
LTC 9 10133 -6
ICPT 20 166374 -2
EBON 1 1584 1
WSFS 12 108404 -5
KN 23 218625 -1
Average 14.6 90178 -1.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.6 hedge funds with bullish positions and the average amount invested in these stocks was $90 million. That figure was $66 million in GEO’s case. Murphy Oil Corporation (NYSE:MUR) is the most popular stock in this table. On the other hand Ebang International Holdings Inc. (NASDAQ:EBON) is the least popular one with only 1 bullish hedge fund positions. The Geo Group, Inc. (NYSE:GEO) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for GEO is 36.6. 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 negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 32.9% in 2020 through December 8th and surpassed the market again by 16.2 percentage points. Unfortunately GEO wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); GEO investors were disappointed as the stock returned -12.2% since the end of September (through 12/8) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

Follow Geo Group Inc (NYSE:GEO)

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