We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Genworth Financial Inc (NYSE:GNW).
Genworth Financial Inc (NYSE:GNW) has seen an increase in activity from the world’s largest hedge funds recently. GNW was in 32 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 29 hedge funds in our database with GNW holdings at the end of the previous quarter. Our calculations also showed that GNW isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
To most traders, hedge funds are seen as unimportant, outdated investment tools of years past. While there are greater than 8000 funds with their doors open at the moment, Our researchers hone in on the masters of this club, about 850 funds. These hedge fund managers have their hands on most of all hedge funds’ total asset base, and by tailing their finest stock picks, Insider Monkey has brought to light many investment strategies that have historically beaten the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Bill Miller of Miller Value Partners
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a gander at the new hedge fund action surrounding Genworth Financial Inc (NYSE:GNW).
Hedge fund activity in Genworth Financial Inc (NYSE:GNW)
At Q4’s end, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from one quarter earlier. By comparison, 22 hedge funds held shares or bullish call options in GNW a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
Among these funds, Miller Value Partners held the most valuable stake in Genworth Financial Inc (NYSE:GNW), which was worth $82.1 million at the end of the third quarter. On the second spot was TIG Advisors which amassed $35.3 million worth of shares. Shah Capital Management, Alpine Associates, and Pentwater Capital 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 Shah Capital Management allocated the biggest weight to Genworth Financial Inc (NYSE:GNW), around 14.93% of its 13F portfolio. Litespeed Management is also relatively very bullish on the stock, earmarking 12.32 percent of its 13F equity portfolio to GNW.
As industrywide interest jumped, specific money managers were leading the bulls’ herd. Sonic Capital, managed by Lawrence Kam, initiated the most valuable position in Genworth Financial Inc (NYSE:GNW). Sonic Capital had $9.2 million invested in the company at the end of the quarter. David MacKnight’s One Fin Capital Management also initiated a $1.8 million position during the quarter. The other funds with brand new GNW positions are John Overdeck and David Siegel’s Two Sigma Advisors, David Nguyen and Nancy Oh’s One68 Global Capital, and Peter Muller’s PDT Partners.
Let’s now review hedge fund activity in other stocks similar to Genworth Financial Inc (NYSE:GNW). We will take a look at Crestwood Equity Partners LP (NYSE:CEQP), Ra Pharmaceuticals, Inc. (NASDAQ:RARX), Welbilt, Inc. (NYSE:WBT), and Casella Waste Systems Inc. (NASDAQ:CWST). This group of stocks’ market caps match GNW’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CEQP | 6 | 16286 | -1 |
| RARX | 28 | 863481 | 7 |
| WBT | 28 | 582074 | 1 |
| CWST | 10 | 165394 | -2 |
| Average | 18 | 406809 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $407 million. That figure was $278 million in GNW’s case. Ra Pharmaceuticals, Inc. (NASDAQ:RARX) is the most popular stock in this table. On the other hand Crestwood Equity Partners LP (NYSE:CEQP) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Genworth Financial Inc (NYSE:GNW) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th and still beat the market by 4.2 percentage points. Unfortunately GNW wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on GNW were disappointed as the stock returned -23% during the three months of 2020 (through April 6th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
