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Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Greif, Inc. (NYSE:GEF).
Is GEF a good stock to buy now? Greif, Inc. (NYSE:GEF) investors should pay attention to a decrease in hedge fund sentiment recently. Greif, Inc. (NYSE:GEF) was in 15 hedge funds' portfolios at the end of September. The all time high for this statistic is 24. Our calculations also showed that GEF 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Paul Isaac of Arbiter Partners Capital Management
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. With all of this in mind we're going to take a look at the key hedge fund action encompassing Greif, Inc. (NYSE:GEF).
Do Hedge Funds Think GEF Is A Good Stock To Buy Now?
At Q3's end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -12% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards GEF over the last 21 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.
More specifically, GAMCO Investors was the largest shareholder of Greif, Inc. (NYSE:GEF), with a stake worth $24.7 million reported as of the end of September. Trailing GAMCO Investors was AQR Capital Management, which amassed a stake valued at $18.6 million. Arbiter Partners Capital Management, Arrowstreet Capital, and Citadel Investment Group 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 Arbiter Partners Capital Management allocated the biggest weight to Greif, Inc. (NYSE:GEF), around 0.54% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, setting aside 0.27 percent of its 13F equity portfolio to GEF.
Judging by the fact that Greif, Inc. (NYSE:GEF) has experienced a decline in interest from the aggregate hedge fund industry, we can see that there were a few funds that decided to sell off their positions entirely heading into Q4. Intriguingly, D. E. Shaw's D E Shaw cut the biggest investment of the "upper crust" of funds tracked by Insider Monkey, totaling about $1.6 million in stock. Dmitry Balyasny's fund, Balyasny Asset Management, also sold off its stock, about $0.6 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 2 funds heading into Q4.
Let's now take a look at hedge fund activity in other stocks similar to Greif, Inc. (NYSE:GEF). We will take a look at Beacon Roofing Supply, Inc. (NASDAQ:BECN), Sumo Logic, Inc. (NASDAQ:SUMO), California Water Service Group (NYSE:CWT), Apple Hospitality REIT Inc (NYSE:APLE), Applied Industrial Technologies Inc (NYSE:AIT), Copa Holdings, S.A. (NYSE:CPA), and Arcosa, Inc. (NYSE:ACA). This group of stocks' market caps are similar to GEF's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BECN,23,323585,7 SUMO,13,150448,13 CWT,14,83115,-2 APLE,14,79181,0 AIT,24,63259,9 CPA,24,203185,0 ACA,19,169792,3 Average,18.7,153224,4.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.7 hedge funds with bullish positions and the average amount invested in these stocks was $153 million. That figure was $76 million in GEF's case. Applied Industrial Technologies Inc (NYSE:AIT) is the most popular stock in this table. On the other hand Sumo Logic, Inc. (NASDAQ:SUMO) is the least popular one with only 13 bullish hedge fund positions. Greif, Inc. (NYSE:GEF) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for GEF is 30.8. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on GEF as the stock returned 28.3% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.