Does Genesco Inc. (NYSE:GCO) represent a good buying opportunity at the moment? Let’s briefly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail unconceivably on some occasions, but their stock picks have been generating superior risk-adjusted returns on average over the years.
Is Genesco Inc. (NYSE:GCO) a worthy stock to buy now? The best stock pickers are taking a bullish view. The number of long hedge fund bets increased by 2 lately. Our calculations also showed that GCO isn’t among the 30 most popular stocks among hedge funds. GCO was in 19 hedge funds’ portfolios at the end of the third quarter of 2018. There were 17 hedge funds in our database with GCO positions at the end of the previous quarter.
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 market by 18 percentage points since May 2014 through December 3, 2018 (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.
We’re going to analyze the recent hedge fund action surrounding Genesco Inc. (NYSE:GCO).
What have hedge funds been doing with Genesco Inc. (NYSE:GCO)?
At Q3’s end, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 12% from the second quarter of 2018. By comparison, 10 hedge funds held shares or bullish call options in GCO heading into this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Legion Partners Asset Management was the largest shareholder of Genesco Inc. (NYSE:GCO), with a stake worth $40.7 million reported as of the end of September. Trailing Legion Partners Asset Management was Arrowstreet Capital, which amassed a stake valued at $14.6 million. Royce & Associates, Millennium Management, and Maverick Capital were also very fond of the stock, giving the stock large weights in their portfolios.
As aggregate interest increased, key hedge funds were breaking ground themselves. Blue Mountain Capital, managed by Andrew Feldstein and Stephen Siderow, assembled the largest position in Genesco Inc. (NYSE:GCO). Blue Mountain Capital had $0.7 million invested in the company at the end of the quarter. Philippe Laffont’s Coatue Management also initiated a $0.6 million position during the quarter. The only other fund with a brand new GCO position is Jeffrey Talpins’s Element Capital Management.
Let’s go over hedge fund activity in other stocks similar to Genesco Inc. (NYSE:GCO). These stocks are Bryn Mawr Bank Corp. (NASDAQ:BMTC), New Media Investment Group Inc (NYSE:NEWM), ARMOUR Residential REIT, Inc. (NYSE:ARR), and Assembly Biosciences Inc (NASDAQ:ASMB). This group of stocks’ market valuations resemble GCO’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BMTC | 9 | 51230 | -2 |
| NEWM | 20 | 83759 | 3 |
| ARR | 3 | 19432 | -2 |
| ASMB | 20 | 269945 | 1 |
| Average | 13 | 106092 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $106 million. That figure was $93 million in GCO’s case. New Media Investment Group Inc (NYSE:NEWM) is the most popular stock in this table. On the other hand ARMOUR Residential REIT, Inc. (NYSE:ARR) is the least popular one with only 3 bullish hedge fund positions. Genesco Inc. (NYSE:GCO) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard NEWM might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
