The market has been volatile as the Federal Reserve winds down its easy money policies. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 14 percentage points between June 25th and the end of October. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure, and the funds’ movements is one of the reasons why the major indexes have retraced. In this article, we analyze what the smart money thinks of General Finance Corporation (NASDAQ:GFN) and find out how it is affected by hedge funds’ moves.
Hedge fund interest in General Finance Corporation (NASDAQ:GFN) shares remained unchanged at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare GFN to other stocks, including Cumberland Pharmaceuticals, Inc. (NASDAQ:CPIX), Tremor Video Inc (NYSE:TRMR), and Trillium Therapeutics Inc. (NASDAQ:TRIL) to get a better sense of its popularity.
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At the moment there are plenty of formulas investors employ to size up stocks. A pair of the most underrated formulas are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the top picks of the best investment managers can beat the S&P 500 by a solid amount (see the details here).
With all of this in mind, we’re going to review the fresh action surrounding General Finance Corporation (NASDAQ:GFN).
What does the smart money think about General Finance Corporation (NASDAQ:GFN)?
At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, D. E. Shaw holds the largest position in General Finance Corporation (NASDAQ:GFN). D. E. Shaw has a $0.4 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is Jim Simons’ Renaissance Technologies holding a $0.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions encompass Israel Englander’s Millennium Management and Richard Driehaus’s Driehaus Capital.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as General Finance Corporation (NASDAQ:GFN) but similarly valued. We will take a look at Cumberland Pharmaceuticals, Inc. (NASDAQ:CPIX), Tremor Video Inc (NYSE:TRMR), Trillium Therapeutics Inc. (NASDAQ:TRIL), and RADCOM Ltd. (NASDAQ:RDCM). This group of stocks’ market caps are closest to GFN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CPIX | 5 | 13557 | 0 |
| TRMR | 7 | 8047 | -1 |
| TRIL | 8 | 14983 | 1 |
| RDCM | 4 | 13912 | -1 |
As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $13 million, significantly below the $1 million figure in GFN’s case. Trillium Therapeutics Inc. (NASDAQ:TRIL) is the most popular stock in this table, while RADCOM Ltd. (NASDAQ:RDCM) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks General Finance Corporation (NASDAQ:GFN) is even less popular than RDCM. 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 required.
