World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients’ money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It’s not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It’s also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.
Generac Holdings Inc. (NYSE:GNRC) shareholders have witnessed a decrease in enthusiasm from smart money of late. Our calculations also showed that gnrc isn’t among the 30 most popular stocks among hedge funds.
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 32 percentage points since May 2014 through March 12, 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.
Let’s view the fresh hedge fund action surrounding Generac Holdings Inc. (NYSE:GNRC).
What does the smart money think about Generac Holdings Inc. (NYSE:GNRC)?
Heading into the first quarter of 2019, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in GNRC over the last 14 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
Among these funds, Impax Asset Management held the most valuable stake in Generac Holdings Inc. (NYSE:GNRC), which was worth $46.6 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $9.1 million worth of shares. Moreover, Waterfront Capital Partners, GLG Partners, and Marshall Wace LLP were also bullish on Generac Holdings Inc. (NYSE:GNRC), allocating a large percentage of their portfolios to this stock.
Judging by the fact that Generac Holdings Inc. (NYSE:GNRC) has faced bearish sentiment from the entirety of the hedge funds we track, we can see that there was a specific group of funds that slashed their positions entirely by the end of the third quarter. Interestingly, Gilchrist Berg’s Water Street Capital dropped the largest investment of all the hedgies monitored by Insider Monkey, comprising close to $12.8 million in stock, and Lee Ainslie’s Maverick Capital was right behind this move, as the fund sold off about $8.6 million worth. These moves are interesting, as total hedge fund interest fell by 3 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Generac Holdings Inc. (NYSE:GNRC) but similarly valued. These stocks are RLI Corp. (NYSE:RLI), Dicks Sporting Goods Inc (NYSE:DKS), Merit Medical Systems, Inc. (NASDAQ:MMSI), and Blackbaud, Inc. (NASDAQ:BLKB). This group of stocks’ market caps are closest to GNRC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RLI | 12 | 142321 | 1 |
| DKS | 22 | 168865 | 1 |
| MMSI | 18 | 207217 | 6 |
| BLKB | 13 | 57776 | 0 |
| Average | 16.25 | 144045 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $144 million. That figure was $112 million in GNRC’s case. Dicks Sporting Goods Inc (NYSE:DKS) is the most popular stock in this table. On the other hand RLI Corp. (NYSE:RLI) is the least popular one with only 12 bullish hedge fund positions. Generac Holdings Inc. (NYSE:GNRC) 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. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately GNRC wasn’t nearly as popular as these 15 stock and hedge funds that were betting on GNRC were disappointed as the stock returned 9.3% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
