Should I Buy Generac Holdings Inc. (GNRC)?

In this article we will take a look at whether hedge funds think Generac Holdings Inc. (NYSE:GNRC) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is Generac Holdings Inc. (NYSE:GNRC) worth your attention right now? The smart money was turning bullish. The number of bullish hedge fund positions increased by 2 lately. Generac Holdings Inc. (NYSE:GNRC) was in 38 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 43. Our calculations also showed that GNRC isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 36 hedge funds in our database with GNRC positions at the end of the first quarter.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Nick Thakore of Diametric Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now we’re going to take a gander at the fresh hedge fund action encompassing Generac Holdings Inc. (NYSE:GNRC).

Do Hedge Funds Think GNRC Is A Good Stock To Buy Now?

Heading into the third quarter of 2021, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the first quarter of 2020. On the other hand, there were a total of 36 hedge funds with a bullish position in GNRC a year ago. 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, Impax Asset Management held the most valuable stake in Generac Holdings Inc. (NYSE:GNRC), which was worth $254.1 million at the end of the second quarter. On the second spot was Citadel Investment Group which amassed $122.3 million worth of shares. PEAK6 Capital Management, AQR Capital Management, and Sphera Global Healthcare Fund 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 Diametric Capital allocated the biggest weight to Generac Holdings Inc. (NYSE:GNRC), around 3.36% of its 13F portfolio. Sphera Global Healthcare Fund is also relatively very bullish on the stock, setting aside 2.93 percent of its 13F equity portfolio to GNRC.

Consequently, some big names have been driving this bullishness. Adage Capital Management, managed by Phill Gross and Robert Atchinson, assembled the largest position in Generac Holdings Inc. (NYSE:GNRC). Adage Capital Management had $28 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $6.8 million position during the quarter. The other funds with brand new GNRC positions are Michael Cowley’s Sandbar Asset Management, Nick Thakore’s Diametric Capital, and Clint Carlson’s Carlson Capital.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Generac Holdings Inc. (NYSE:GNRC) but similarly valued. These stocks are Slack Technologies Inc (NYSE:WORK), Hormel Foods Corporation (NYSE:HRL), Weyerhaeuser Co. (NYSE:WY), Kansas City Southern (NYSE:KSU), Teladoc Health, Inc (NYSE:TDOC), Verisign, Inc. (NASDAQ:VRSN), and Telefonica S.A. (NYSE:TEF). This group of stocks’ market valuations are closest to GNRC’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 39 hedge funds with bullish positions and the average amount invested in these stocks was $2792 million. That figure was $594 million in GNRC’s case. Slack Technologies Inc (NYSE:WORK) is the most popular stock in this table. On the other hand Telefonica S.A. (NYSE:TEF) is the least popular one with only 4 bullish hedge fund positions. Generac Holdings Inc. (NYSE:GNRC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for GNRC is 63.3. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 21.8% in 2021 through October 11th and surpassed the market again by 4.4 percentage points. Unfortunately GNRC wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); GNRC investors were disappointed as the stock returned -1.3% since the end of June (through 10/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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Disclosure: None. This article was originally published at Insider Monkey.