Is Genesis Energy, L.P. (GEL) A Good Stock To Buy?

As we already know from media reports and hedge fund investor letters, many hedge funds lost money in the third quarter, blaming macroeconomic conditions and unpredictable events that hit several sectors, with healthcare among them. Nevertheless, most investors decided to stick to their bullish theses and their long-term focus allows us to profit from the recent declines. In particular, let’s take a look at what hedge funds think about Genesis Energy, L.P. (NYSE:GEL) in this article.

Hedge fund interest in Genesis Energy’s 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 GEL to other stocks, including Graphic Packaging Holding Company (NYSE:GPK), Navient Corp (NASDAQ:NAVI), and Taubman Centers, Inc. (NYSE:TCO) to get a better sense of its popularity.

In the eyes of most traders, hedge funds are viewed as slow, outdated investment vehicles of yesteryear. While there are over 8000 funds trading at the moment, We look at the crème de la crème of this group, approximately 700 funds. It is estimated that this group of investors orchestrate bulk of the hedge fund industry’s total capital, and by keeping track of their highest performing picks, Insider Monkey has deciphered many investment strategies that have historically exceeded the market. Insider Monkey’s small-cap hedge fund strategy exceeded the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

With all of this in mind, let’s view the key action surrounding Genesis Energy, L.P. (NYSE:GEL).

Hedge fund activity in Genesis Energy, L.P. (NYSE:GEL)

At the Q3’s end, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Selz Capital, managed by Bernard Selz, holds the number one position in Genesis Energy, L.P. (NYSE:GEL). Selz Capital has a $11.8 million position in the stock, comprising 3.3% of its 13F portfolio. On Selz Capital’s heels is Zimmer Partners, led by Stuart J. Zimmer, holding a $5.7 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions include Israel Englander’s Millennium Management, and George Hall’s Clinton Group.

Due to the fact that Genesis Energy, L.P. (NYSE:GEL) has experienced a declination in interest from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of money managers that elected to cut their positions entirely last quarter. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management sold off the biggest investment of all the hedgies watched by Insider Monkey, valued at an estimated $4 million in stock, and Jim Simons’ Renaissance Technologies was right behind this move, as the fund sold off about $2.9 million worth of shares. These moves are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Genesis Energy, L.P. (NYSE:GEL) but similarly valued. These stocks are Graphic Packaging Holding Company (NYSE:GPK), Navient Corp (NASDAQ:NAVI), Taubman Centers, Inc. (NYSE:TCO), and Douglas Emmett, Inc. (NYSE:DEI). This group of stocks’ market valuations match GEL’s market valuation.

As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $609 million, compared to just $30 million in GEL’s case. Graphic Packaging Holding Company (NYSE:GPK) is the most popular stock in this table, while Douglas Emmett, Inc. (NYSE:DEI) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Genesis Energy, L.P. (NYSE:GEL) is even less popular than DEI. 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.