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Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 817 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Genesco Inc. (NYSE:GCO), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Is GCO a good stock to buy now? Genesco Inc. (NYSE:GCO) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 13 hedge funds' portfolios at the end of September. Our calculations also showed that GCO isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare GCO to other stocks including Craft Brew Alliance Inc (NASDAQ:BREW), Precision BioSciences, Inc. (NASDAQ:DTIL), and Oportun Financial Corporation (NASDAQ:OPRT) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ian Wace of Marshall Wace
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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. Keeping this in mind we're going to take a glance at the recent hedge fund action surrounding Genesco Inc. (NYSE:GCO).
Do Hedge Funds Think GCO Is A Good Stock To Buy Now?
At third quarter's end, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in GCO over the last 21 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Arrowstreet Capital was the largest shareholder of Genesco Inc. (NYSE:GCO), with a stake worth $5.8 million reported as of the end of September. Trailing Arrowstreet Capital was Rubric Capital Management, which amassed a stake valued at $4.6 million. Balyasny Asset Management, Millennium Management, and Invenomic Capital Management 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 Invenomic Capital Management allocated the biggest weight to Genesco Inc. (NYSE:GCO), around 0.81% of its 13F portfolio. Rubric Capital Management is also relatively very bullish on the stock, setting aside 0.43 percent of its 13F equity portfolio to GCO.
Because Genesco Inc. (NYSE:GCO) has faced declining sentiment from hedge fund managers, it's safe to say that there lies a certain "tier" of money managers who were dropping their full holdings heading into Q4. Interestingly, Brian C. Freckmann's Lyon Street Capital sold off the largest investment of the 750 funds watched by Insider Monkey, totaling close to $0.6 million in stock. Renaissance Technologies, also cut its stock, about $0.5 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Genesco Inc. (NYSE:GCO) but similarly valued. These stocks are Craft Brew Alliance Inc (NASDAQ:BREW), Precision BioSciences, Inc. (NASDAQ:DTIL), Oportun Financial Corporation (NASDAQ:OPRT), Artesian Resources Corporation (NASDAQ:ARTNA), Aspira Women's Health Inc. (NASDAQ:AWH), Whole Earth Brands, Inc. (NASDAQ:FREE), and Allot Ltd. (NASDAQ:ALLT). This group of stocks' market valuations match GCO's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BREW,11,43900,-4 DTIL,14,13568,2 OPRT,5,2600,0 ARTNA,1,14960,0 AWH,4,10268,2 FREE,22,85656,-1 ALLT,13,117119,1 Average,10,41153,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $41 million. That figure was $21 million in GCO's case. Whole Earth Brands, Inc. (NASDAQ:FREE) is the most popular stock in this table. On the other hand Artesian Resources Corporation (NASDAQ:ARTNA) is the least popular one with only 1 bullish hedge fund positions. Genesco Inc. (NYSE:GCO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GCO is 51.3. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on GCO as the stock returned 53.6% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.