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Gencor Industries, Inc. (GENC): Are Hedge Funds Right About This Stock?

Asma UL Husna

In this article we will take a look at whether hedge funds think Gencor Industries, Inc. (NASDAQ:GENC) 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.

Gencor Industries, Inc. (NASDAQ:GENC) has experienced an increase in support from the world's most elite money managers lately. Our calculations also showed that GENC isn't among the 30 most popular stocks among hedge funds (click for Q1 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.

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 51 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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_375529" align="aligncenter" width="399"] Mario Gabelli of GAMCO Investors[/caption]

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020's unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let's analyze the latest hedge fund action encompassing Gencor Industries, Inc. (NASDAQ:GENC).

How are hedge funds trading Gencor Industries, Inc. (NASDAQ:GENC)?

At Q1's end, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in GENC over the last 18 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the biggest position in Gencor Industries, Inc. (NASDAQ:GENC). Royce & Associates has a $15.1 million position in the stock, comprising 0.2% of its 13F portfolio. On Royce & Associates's heels is Renaissance Technologies, holding a $5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other peers that are bullish include Mario Gabelli's GAMCO Investors, Ken Griffin's Citadel Investment Group and . In terms of the portfolio weights assigned to each position Royce & Associates allocated the biggest weight to Gencor Industries, Inc. (NASDAQ:GENC), around 0.21% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, dishing out 0.0049 percent of its 13F equity portfolio to GENC.

As industrywide interest jumped, key hedge funds have jumped into Gencor Industries, Inc. (NASDAQ:GENC) headfirst. Citadel Investment Group, managed by Ken Griffin, created the most outsized position in Gencor Industries, Inc. (NASDAQ:GENC). Citadel Investment Group had $0.1 million invested in the company at the end of the quarter.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Gencor Industries, Inc. (NASDAQ:GENC) but similarly valued. These stocks are Timberland Bancorp, Inc. (NASDAQ:TSBK), Alexco Resource Corp. (NYSE:AXU), Denison Mines Corp (NYSE:DNN), and RADA Electronic Industries Ltd. (NASDAQ:RADA). This group of stocks' market values match GENC's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TSBK,3,19601,-2 AXU,4,763,2 DNN,4,2045,0 RADA,6,7927,3 Average,4.25,7584,0.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 4.25 hedge funds with bullish positions and the average amount invested in these stocks was $8 million. That figure was $21 million in GENC's case. RADA Electronic Industries Ltd. (NASDAQ:RADA) is the most popular stock in this table. On the other hand Timberland Bancorp, Inc. (NASDAQ:TSBK) is the least popular one with only 3 bullish hedge fund positions. Gencor Industries, Inc. (NASDAQ:GENC) is not the least popular stock in this group but hedge fund interest is still below average. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately GENC wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); GENC investors were disappointed as the stock returned 13.4% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 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.

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