Hedge Funds Are Selling Green Plains Renewable Energy Inc. (GPRE)

Based on the fact that hedge funds have collectively under-performed the market for several years, it would be easy to assume that their stock picks simply aren’t very good. However, our research shows this not to be the case. In fact, when it comes to their very top picks collectively, they show a strong ability to pick winning stocks. Between November 1, 2014 and October 30 of this year, less than 49% of the stocks in the S&P 500 beat the market. However, hedge funds’ top 30 stock picks from the index had a much higher success rate than this, at 63%. The returns from these 30 stocks also easily bested the broader market, at 9.5% compared to 5.2%, despite there being a few duds in there like Micron and Anadarko (even their collective wisdom isn’t perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.

Green Plains Renewable Energy Inc. (NASDAQ:GPRE) was in 17 hedge funds’ portfolios at the end of September. GPRE has experienced a decrease in hedge fund sentiment lately. There were 27 hedge funds in our database with GPRE positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Cardinal Financial Corporation (NASDAQ:CFNL), State Bank Financial Corp (NASDAQ:STBZ), and Navigator Holdings Ltd (NYSE:NVGS) to gather more data points.

At the moment there are a large number of formulas market participants have at their disposal to grade publicly traded companies. Some of the best formulas are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the top picks of the best hedge fund managers can outperform the S&P 500 by a significant margin (see the details here).

With all of this in mind, let’s take a look at the recent action encompassing Green Plains Renewable Energy Inc. (NASDAQ:GPRE).

How have hedgies been trading Green Plains Renewable Energy Inc. (NASDAQ:GPRE)?

Heading into Q4, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a decrease of 37% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Jason Karp’s Tourbillon Capital Partners has the biggest position in Green Plains Renewable Energy Inc. (NASDAQ:GPRE), worth close to $66.8 million, comprising 1.8% of its total 13F portfolio. The second largest stake is held by Ken Griffin of Citadel Investment Group, with a $37 million stake; the fund has less than 0.1% of its 13F portfolio invested in the stock. Other peers that are bullish comprise D. E. Shaw’s D E Shaw, John Segrich and Michael Molnar’s Lorem Ipsum Management and Jason Karp’s Tourbillon Capital Partners.

Since Green Plains Renewable Energy Inc. (NASDAQ:GPRE) has faced bearish sentiment from hedge fund managers, we can see that there were a few fund managers who were dropping their entire stakes heading into Q4. At the top of the heap, Christopher A. Winham’s Tide Point Capital cut the biggest investment of all the hedgies watched by Insider Monkey, totaling about $5.5 million in stock, and Jim Simons’s Renaissance Technologies was right behind this move, as the fund said goodbye to about $2.9 million worth of GPRE shares. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 10 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks similar to Green Plains Renewable Energy Inc. (NASDAQ:GPRE). We will take a look at Cardinal Financial Corporation (NASDAQ:CFNL), State Bank Financial Corp (NASDAQ:STBZ), Navigator Holdings Ltd (NYSE:NVGS), and Capital Southwest Corporation (NASDAQ:CSWC). This group of stocks’ market valuations resemble GPRE’s market valuation.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $164 million. Coincidentally, all four companies in this group have attracted the attention of the same number of funds: 11. Green Plains Renewable Energy Inc. (NASDAQ:GPRE) easily outshines the lot, as it can be found in the portfolios of 17 elite funds, who have control over an estimated $172 million worth of stock. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.