Hedge funds run by legendary names like George Soros and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That’s why we pay special attention to hedge fund activity in these stocks.
Hedge fund interest in Genco Shipping & Trading Limited (NYSE:GNK) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare GNK to other stocks including MiX Telematics Limited (NYSE:MIXT), Oppenheimer Holdings Inc. (NYSE:OPY), and Greenlane Holdings, Inc. (NASDAQ:GNLN) to get a better sense of its popularity.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 40 percentage points since May 2014 through May 30, 2019 (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.
In addition to following the biggest hedge funds for investment ideas, we also share stock pitches from conferences, investor letters and other sources like this one where the fund manager is talking about two under the radar 1000% return potential stocks: first one in internet infrastructure and the second in the heart of advertising market. We use hedge fund buy/sell signals to determine whether to conduct in-depth analysis of these stock ideas which take days. We’re going to check out the recent hedge fund action surrounding Genco Shipping & Trading Limited (NYSE:GNK).
Hedge fund activity in Genco Shipping & Trading Limited (NYSE:GNK)
Heading into the third quarter of 2019, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in GNK over the last 16 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Centerbridge Partners held the most valuable stake in Genco Shipping & Trading Limited (NYSE:GNK), which was worth $88.5 million at the end of the second quarter. On the second spot was Strategic Value Partners which amassed $85.8 million worth of shares. Moreover, Mangrove Partners, Renaissance Technologies, and 683 Capital Partners were also bullish on Genco Shipping & Trading Limited (NYSE:GNK), allocating a large percentage of their portfolios to this stock.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the second quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s check out hedge fund activity in other stocks similar to Genco Shipping & Trading Limited (NYSE:GNK). We will take a look at MiX Telematics Limited (NYSE:MIXT), Oppenheimer Holdings Inc. (NYSE:OPY), Greenlane Holdings, Inc. (NASDAQ:GNLN), and Calix Inc (NYSE:CALX). This group of stocks’ market valuations are closest to GNK’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MIXT | 8 | 46948 | 0 |
| OPY | 9 | 36092 | 0 |
| GNLN | 6 | 21145 | 6 |
| CALX | 14 | 93596 | -3 |
| Average | 9.25 | 49445 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.25 hedge funds with bullish positions and the average amount invested in these stocks was $49 million. That figure was $194 million in GNK’s case. Calix Inc (NYSE:CALX) is the most popular stock in this table. On the other hand Greenlane Holdings, Inc. (NASDAQ:GNLN) is the least popular one with only 6 bullish hedge fund positions. Genco Shipping & Trading Limited (NYSE:GNK) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on GNK as the stock returned 9% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
