Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Genworth Financial Inc (NYSE:GNW)? The smart money sentiment can provide an answer to this question.
Is GNW stock a buy? Genworth Financial Inc (NYSE:GNW) was in 36 hedge funds’ portfolios at the end of December. The all time high for this statistic is 38. GNW investors should be aware of a decrease in enthusiasm from smart money of late. There were 38 hedge funds in our database with GNW positions at the end of the third quarter. Our calculations also showed that GNW isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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 S&P 500 ETFs by 124 percentage points since March 2017 (see the details here).
Bill Miller of Miller Value Partners
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let’s review the new hedge fund action encompassing Genworth Financial Inc (NYSE:GNW).
Do Hedge Funds Think GNW Is A Good Stock To Buy Now?
At Q4’s end, a total of 36 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from the previous quarter. The graph below displays the number of hedge funds with bullish position in GNW over the last 22 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, Shah Capital Management held the most valuable stake in Genworth Financial Inc (NYSE:GNW), which was worth $36 million at the end of the fourth quarter. On the second spot was Maso Capital which amassed $30 million worth of shares. Miller Value Partners, Sonic Capital, and GLG Partners 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 Litespeed Management allocated the biggest weight to Genworth Financial Inc (NYSE:GNW), around 15.06% of its 13F portfolio. Sonic Capital is also relatively very bullish on the stock, earmarking 12.79 percent of its 13F equity portfolio to GNW.
Seeing as Genworth Financial Inc (NYSE:GNW) has witnessed declining sentiment from the aggregate hedge fund industry, it’s easy to see that there exists a select few money managers that decided to sell off their entire stakes heading into Q1. It’s worth mentioning that David Alexander Witkin’s Beryl Capital Management cut the biggest stake of the 750 funds tracked by Insider Monkey, comprising an estimated $6.7 million in stock, and Charles Lemonides’s Valueworks LLC was right behind this move, as the fund said goodbye to about $3.1 million worth. These moves are interesting, as total hedge fund interest was cut by 2 funds heading into Q1.
Let’s also examine hedge fund activity in other stocks similar to Genworth Financial Inc (NYSE:GNW). These stocks are Domo Inc. (NASDAQ:DOMO), Inter Parfums, Inc. (NASDAQ:IPAR), CorVel Corporation (NASDAQ:CRVL), SiTime Corporation (NASDAQ:SITM), Service Properties Trust (NASDAQ:SVC), Renasant Corporation (NASDAQ:RNST), and Precigen, Inc. (NYSE:PGEN). This group of stocks’ market valuations match GNW’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DOMO | 22 | 282591 | -2 |
| IPAR | 12 | 83639 | -5 |
| CRVL | 13 | 132960 | 1 |
| SITM | 11 | 141361 | 5 |
| SVC | 20 | 139011 | 5 |
| RNST | 7 | 12159 | -2 |
| PGEN | 11 | 100654 | -1 |
| Average | 13.7 | 127482 | 0.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.7 hedge funds with bullish positions and the average amount invested in these stocks was $127 million. That figure was $282 million in GNW’s case. Domo Inc. (NASDAQ:DOMO) is the most popular stock in this table. On the other hand Renasant Corporation (NASDAQ:RNST) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Genworth Financial Inc (NYSE:GNW) is more popular among hedge funds. Our overall hedge fund sentiment score for GNW is 81.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7.9% in 2021 through April 1st and still beat the market by 0.4 percentage points. Unfortunately GNW wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on GNW were disappointed as the stock returned -9.8% since the end of the fourth quarter (through 4/1) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
