Is Genesee & Wyoming Inc (GWR) a Good Stock to Buy?

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 7.6% over the 12-month period ending November 21, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored mid-cap stocks by the best performing hedge funds monitored by Insider Monkey generated a return of 18% over the same time span. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Genesee & Wyoming Inc (NYSE:GWR) .

Is Genesee & Wyoming Inc (NYSE:GWR) a great investment today? It looks like the best stock pickers are getting less optimistic. Among the funds in our database, the number of bullish hedge fund positions that are disclosed in regulatory 13F filings dropped by four last quarter. At the end of this article we will also compare GWR to other stocks including AGCO Corporation (NYSE:AGCO), Synovus Financial Corp. (NYSE:SNV), and Tahoe Resources Inc (NYSE:TAHO) to get a better sense of its popularity.

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.

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Now, we’re going to take a peek at the key action encompassing Genesee & Wyoming Inc (NYSE:GWR).

How are hedge funds trading Genesee & Wyoming Inc (NYSE:GWR)?

At Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, down by 25% from the previous quarter. By comparison, 20 hedge funds held shares or bullish call options in GWR heading into this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Cardinal Capital, led by Amy Minella, holds the largest position in Genesee & Wyoming Inc (NYSE:GWR). Cardinal Capital has a $56.2 million position in the stock, comprising 2.6% of its 13F portfolio. The second largest stake is held by Steve Cohen’s Point72 Asset Management, which holds a $33.4 million position; 0.2% of its 13F portfolio is allocated to the stock. Remaining peers with similar optimism contain Edward Goodnow’s Goodnow Investment Group, Alexander Mitchell’s Scopus Asset Management, and Michael Platt and William Reeves’ BlueCrest Capital Mgmt. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Since Genesee & Wyoming Inc (NYSE:GWR) has weathered bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there exists a select few funds that decided to sell off their entire stakes last quarter. It’s worth mentioning that Jonathan Barrett and Paul Segal’s Luminus Management sold off the largest position of the “upper crust” of funds tracked by Insider Monkey, worth close to $49.1 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund sold off about $27.2 million worth of shares.

Let’s go over hedge fund activity in other stocks similar to Genesee & Wyoming Inc (NYSE:GWR). We will take a look at AGCO Corporation (NYSE:AGCO), Synovus Financial Corp. (NYSE:SNV), Tahoe Resources Inc (NYSE:TAHO), and Retail Properties of America Inc (NYSE:RPAI). This group of stocks’ market valuations resemble GWR’s market valuation.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $343 million. That figure was $169 million in GWR’s case. AGCO Corporation (NYSE:AGCO) is the most popular stock in this table. On the other hand Retail Properties of America Inc (NYSE:RPAI) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Genesee & Wyoming Inc (NYSE:GWR) is even less popular than RPAI. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

Disclosure: none