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In this article we will take a look at whether hedge funds think Genasys Inc. (NASDAQ:GNSS) 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.
Hedge fund interest in Genasys Inc. (NASDAQ:GNSS) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that GNSS 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). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Venator Materials PLC (NYSE:VNTR), Caledonia Mining Corporation Plc (NYSE:CMCL), and Lifetime Brands Inc (NASDAQ:LCUT) to gather more data points.
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 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 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Louis Navellier of Navellier & Associates
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 let's take a peek at the new hedge fund action regarding Genasys Inc. (NASDAQ:GNSS).
What does smart money think about Genasys Inc. (NASDAQ:GNSS)?
At the end of the third quarter, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2020. By comparison, 6 hedge funds held shares or bullish call options in GNSS a year ago. With hedge funds' sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
Among these funds, Manatuck Hill Partners held the most valuable stake in Genasys Inc. (NASDAQ:GNSS), which was worth $16.5 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $3.4 million worth of shares. Arrowstreet Capital, Navellier & Associates, 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 Manatuck Hill Partners allocated the biggest weight to Genasys Inc. (NASDAQ:GNSS), around 7.57% of its 13F portfolio. Navellier & Associates is also relatively very bullish on the stock, designating 0.08 percent of its 13F equity portfolio to GNSS.
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 also examine hedge fund activity in other stocks - not necessarily in the same industry as Genasys Inc. (NASDAQ:GNSS) but similarly valued. These stocks are Venator Materials PLC (NYSE:VNTR), Caledonia Mining Corporation Plc (NYSE:CMCL), Lifetime Brands Inc (NASDAQ:LCUT), Gamida Cell Ltd. (NASDAQ:GMDA), Verastem Inc (NASDAQ:VSTM), Mastech Digital, Inc. (NYSE:MHH), and Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB). All of these stocks' market caps resemble GNSS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VNTR,10,20533,1 CMCL,4,4812,1 LCUT,5,2117,3 GMDA,10,31096,1 VSTM,11,34590,-7 MHH,4,4989,1 RRGB,10,12324,-4 Average,7.7,15780,-0.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.7 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $21 million in GNSS's case. Verastem Inc (NASDAQ:VSTM) is the most popular stock in this table. On the other hand Caledonia Mining Corporation Plc (NYSE:CMCL) is the least popular one with only 4 bullish hedge fund positions. Genasys Inc. (NASDAQ:GNSS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for GNSS is 37.1. 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 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 November 27th and surpassed the market again by 16.1 percentage points. Unfortunately GNSS wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); GNSS investors were disappointed as the stock returned 6.7% since the end of September (through 11/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.