The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing more than 750 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of September 30th, 2019. In this article we are going to take a look at smart money sentiment towards General Finance Corporation (NASDAQ:GFN).
General Finance Corporation (NASDAQ:GFN) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 5 hedge funds' portfolios at the end of the third quarter of 2019. At the end of this article we will also compare GFN to other stocks including Entravision Communications Corporation (NYSE:EVC), MOGU Inc. (NYSE:MOGU), and MutualFirst Financial, Inc. (NASDAQ:MFSF) to get a better sense of its popularity. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_673876" align="aligncenter" width="473"] John Overdeck of Two Sigma Advisors[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. With all of this in mind we're going to take a gander at the fresh hedge fund action surrounding General Finance Corporation (NASDAQ:GFN).
Hedge fund activity in General Finance Corporation (NASDAQ:GFN)
At Q3's end, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 8 hedge funds held shares or bullish call options in GFN a year ago. With hedgies' capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Renaissance Technologies holds the biggest position in General Finance Corporation (NASDAQ:GFN). Renaissance Technologies has a $6.6 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by Royce & Associates, managed by Chuck Royce, which holds a $2.6 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions comprise John Overdeck and David Siegel's Two Sigma Advisors, Israel Englander's Millennium Management and Gavin Saitowitz and Cisco J. del Valle's Springbok Capital. In terms of the portfolio weights assigned to each position Royce & Associates allocated the biggest weight to General Finance Corporation (NASDAQ:GFN), around 0.02% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to GFN.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Fondren Management. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Springbok Capital).
Let's check out 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 Entravision Communications Corporation (NYSE:EVC), MOGU Inc. (NYSE:MOGU), MutualFirst Financial, Inc. (NASDAQ:MFSF), and Reliant Bancorp, Inc. (NASDAQ:RBNC). This group of stocks' market valuations resemble GFN's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EVC,11,30046,-4 MOGU,2,26364,-1 MFSF,3,26953,0 RBNC,1,432,0 Average,4.25,20949,-1.25 [/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 $21 million. That figure was $10 million in GFN's case. Entravision Communications Corporation (NYSE:EVC) is the most popular stock in this table. On the other hand Reliant Bancorp, Inc. (NASDAQ:RBNC) is the least popular one with only 1 bullish hedge fund positions. General Finance Corporation (NASDAQ:GFN) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on GFN as the stock returned 22.3% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.