Is Green Plains Inc. (NASDAQ:GPRE) 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 Green Plains Inc. (NASDAQ:GPRE) a worthy investment today? Investors who are in the know were selling. The number of long hedge fund bets were trimmed by 1 lately. Green Plains Inc. (NASDAQ:GPRE) was in 26 hedge funds’ portfolios at the end of June. The all time high for this statistic is 27. Our calculations also showed that GPRE isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
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 79 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.
Richard Driehaus of Driehaus Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let’s take a glance at the recent hedge fund action surrounding Green Plains Inc. (NASDAQ:GPRE).
Do Hedge Funds Think GPRE Is A Good Stock To Buy Now?
At second quarter’s end, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GPRE over the last 24 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
Among these funds, Rubric Capital Management held the most valuable stake in Green Plains Inc. (NASDAQ:GPRE), which was worth $44.8 million at the end of the second quarter. On the second spot was D E Shaw which amassed $39.5 million worth of shares. Driehaus Capital, Portolan Capital Management, and Ancora Advisors 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 Horseman Capital Management allocated the biggest weight to Green Plains Inc. (NASDAQ:GPRE), around 3.85% of its 13F portfolio. Rubric Capital Management is also relatively very bullish on the stock, earmarking 2.82 percent of its 13F equity portfolio to GPRE.
Seeing as Green Plains Inc. (NASDAQ:GPRE) has witnessed falling interest from the smart money, logic holds that there lies a certain “tier” of fund managers that decided to sell off their full holdings by the end of the second quarter. At the top of the heap, Till Bechtolsheimer’s Arosa Capital Management said goodbye to the largest investment of all the hedgies watched by Insider Monkey, totaling about $12.3 million in stock. Till Bechtolsheimer’s fund, Arosa Capital Management, also sold off its stock, about $10.2 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 1 funds by the end of the second quarter.
Let’s go over hedge fund activity in other stocks similar to Green Plains Inc. (NASDAQ:GPRE). We will take a look at Cogentix Medical Inc (NASDAQ:CGNT), Harsco Corporation (NYSE:HSC), Meta Financial Group Inc. (NASDAQ:CASH), Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL), MacroGenics Inc (NASDAQ:MGNX), Sixth Street Specialty Lending Inc (NYSE:TSLX), and Northwest Natural Holding Company (NYSE:NWN). This group of stocks’ market values resemble GPRE’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CGNT | 19 | 345954 | 7 |
| HSC | 11 | 47657 | 1 |
| CASH | 15 | 121640 | 1 |
| MDGL | 20 | 437926 | 3 |
| MGNX | 24 | 437546 | -6 |
| TSLX | 10 | 93984 | 1 |
| NWN | 11 | 14194 | 1 |
| Average | 15.7 | 214129 | 1.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.7 hedge funds with bullish positions and the average amount invested in these stocks was $214 million. That figure was $275 million in GPRE’s case. MacroGenics Inc (NASDAQ:MGNX) is the most popular stock in this table. On the other hand Sixth Street Specialty Lending Inc (NYSE:TSLX) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Green Plains Inc. (NASDAQ:GPRE) is more popular among hedge funds. Our overall hedge fund sentiment score for GPRE is 82.9. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 24.9% in 2021 through October 15th but still managed to beat the market by 4.5 percentage points. Hedge funds were also right about betting on GPRE as the stock returned 3% since the end of June (through 10/15) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
