Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Genpact Limited (NYSE:G) based on that data and determine whether they were really smart about the stock.
Genpact Limited (NYSE:G) has seen a decrease in activity from the world’s largest hedge funds lately. Genpact Limited (NYSE:G) was in 29 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 38. Our calculations also showed that G isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.
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 56 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
John Overdeck of Two Sigma Advisors
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. With all of this in mind let’s analyze the key hedge fund action encompassing Genpact Limited (NYSE:G).
What does smart money think about Genpact Limited (NYSE:G)?
At second quarter’s end, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -15% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards G over the last 20 quarters. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
Among these funds, D E Shaw held the most valuable stake in Genpact Limited (NYSE:G), which was worth $72.2 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $60.2 million worth of shares. Bloom Tree Partners, Two Sigma Advisors, and Pzena Investment Management 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 Dalton Investments allocated the biggest weight to Genpact Limited (NYSE:G), around 10.89% of its 13F portfolio. Old Well Partners is also relatively very bullish on the stock, earmarking 5.9 percent of its 13F equity portfolio to G.
Since Genpact Limited (NYSE:G) has experienced falling interest from the aggregate hedge fund industry, it’s safe to say that there exists a select few hedge funds that slashed their entire stakes heading into Q3. Interestingly, James Parsons’s Junto Capital Management dropped the largest investment of the “upper crust” of funds followed by Insider Monkey, valued at close to $15.6 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund dropped about $6.4 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 5 funds heading into Q3.
Let’s also examine hedge fund activity in other stocks similar to Genpact Limited (NYSE:G). We will take a look at Vereit Inc (NYSE:VER), Service Corporation International (NYSE:SCI), Howmet Aerospace Inc. (NYSE:HWM), Solaredge Technologies Inc (NASDAQ:SEDG), Sociedad Química y Minera de Chile S.A. (NYSE:SQM), Westlake Chemical Corporation (NYSE:WLK), and Cabot Oil & Gas Corporation (NYSE:COG). This group of stocks’ market valuations resemble G’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VER | 23 | 491001 | 5 |
| SCI | 27 | 524384 | -3 |
| HWM | 30 | 2360525 | 5 |
| SEDG | 25 | 435719 | -2 |
| SQM | 14 | 91324 | 4 |
| WLK | 29 | 165262 | 9 |
| COG | 31 | 237488 | -6 |
| Average | 25.6 | 615100 | 1.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.6 hedge funds with bullish positions and the average amount invested in these stocks was $615 million. That figure was $320 million in G’s case. Cabot Oil & Gas Corporation (NYSE:COG) is the most popular stock in this table. On the other hand Sociedad Química y Minera de Chile S.A. (NYSE:SQM) is the least popular one with only 14 bullish hedge fund positions. Genpact Limited (NYSE:G) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for G is 67. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23.8% in 2020 through September 14th and beat the market by 17.6 percentage points. Unfortunately G wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on G were disappointed as the stock returned 7% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Follow Genpact Ltd (NYSE:G)
Follow Genpact Ltd (NYSE:G)
Disclosure: None. This article was originally published at Insider Monkey.
