Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Generac Holdings Inc. (NYSE:GNRC).
Generac Holdings Inc. (NYSE:GNRC) shareholders have witnessed an increase in hedge fund interest lately. Generac Holdings Inc. (NYSE:GNRC) was in 36 hedge funds’ portfolios at the end of March. The all time high for this statistic is 43. There were 32 hedge funds in our database with GNRC holdings at the end of December. Our calculations also showed that GNRC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Jonathan Barrett of Luminus Management
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 battery 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. Keeping this in mind we’re going to analyze the key hedge fund action encompassing Generac Holdings Inc. (NYSE:GNRC).
Do Hedge Funds Think GNRC Is A Good Stock To Buy Now?
At the end of March, a total of 36 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from one quarter earlier. On the other hand, there were a total of 29 hedge funds with a bullish position in GNRC a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
Among these funds, Impax Asset Management held the most valuable stake in Generac Holdings Inc. (NYSE:GNRC), which was worth $234 million at the end of the fourth quarter. On the second spot was Millennium Management which amassed $112.2 million worth of shares. Marshall Wace LLP, Electron Capital Partners, 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 Electron Capital Partners allocated the biggest weight to Generac Holdings Inc. (NYSE:GNRC), around 3.05% of its 13F portfolio. Precept Capital Management is also relatively very bullish on the stock, dishing out 2.9 percent of its 13F equity portfolio to GNRC.
As aggregate interest increased, specific money managers have been driving this bullishness. Electron Capital Partners, managed by Jos Shaver, assembled the biggest position in Generac Holdings Inc. (NYSE:GNRC). Electron Capital Partners had $44.1 million invested in the company at the end of the quarter. Todd J. Kantor’s Encompass Capital Advisors also made a $16 million investment in the stock during the quarter. The other funds with brand new GNRC positions are Jonathan Barrett and Paul Segal’s Luminus Management, D. E. Shaw’s D E Shaw, and Phil Frohlich’s Prescott Group Capital Management.
Let’s go over hedge fund activity in other stocks similar to Generac Holdings Inc. (NYSE:GNRC). We will take a look at Tractor Supply Company (NASDAQ:TSCO), Hewlett Packard Enterprise Company (NYSE:HPE), Western Digital Corporation (NASDAQ:WDC), Take-Two Interactive Software, Inc. (NASDAQ:TTWO), Teradyne, Inc. (NASDAQ:TER), Vipshop Holdings Limited (NYSE:VIPS), and Fortis Inc. (NYSE:FTS). This group of stocks’ market valuations resemble GNRC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TSCO | 29 | 1191886 | -10 |
| HPE | 27 | 1067351 | -3 |
| WDC | 58 | 1913662 | 14 |
| TTWO | 41 | 822415 | -14 |
| TER | 44 | 1587670 | -3 |
| VIPS | 54 | 1341628 | 27 |
| FTS | 10 | 179412 | 1 |
| Average | 37.6 | 1157718 | 1.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 37.6 hedge funds with bullish positions and the average amount invested in these stocks was $1158 million. That figure was $699 million in GNRC’s case. Western Digital Corporation (NASDAQ:WDC) is the most popular stock in this table. On the other hand Fortis Inc. (NYSE:FTS) is the least popular one with only 10 bullish hedge fund positions. Generac Holdings Inc. (NYSE:GNRC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for GNRC is 61.2. 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 gained 19.3% in 2021 through June 25th and still beat the market by 4.8 percentage points. A small number of hedge funds were also right about betting on GNRC as the stock returned 20.9% since the end of the first quarter (through 6/25) and outperformed the market by an even larger margin.
Follow Generac Holdings Inc. (NYSE:GNRC)
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Disclosure: None. This article was originally published at Insider Monkey.
