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While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Generac Holdings Inc. (NYSE:GNRC).
Is GNRC stock a buy? Generac Holdings Inc. (NYSE:GNRC) investors should pay attention to a decrease in hedge fund sentiment lately. Generac Holdings Inc. (NYSE:GNRC) was in 32 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 43. Our calculations also showed that GNRC isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 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.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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 let's check out the recent hedge fund action encompassing Generac Holdings Inc. (NYSE:GNRC).
Do Hedge Funds Think GNRC Is A Good Stock To Buy Now?
Heading into the first quarter of 2021, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -26% from one quarter earlier. On the other hand, there were a total of 32 hedge funds with a bullish position in GNRC a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Impax Asset Management held the most valuable stake in Generac Holdings Inc. (NYSE:GNRC), which was worth $185 million at the end of the fourth quarter. On the second spot was Millennium Management which amassed $72.2 million worth of shares. Point72 Asset Management, Balyasny Asset Management, and Shellback Capital 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 Sphera Global Healthcare Fund allocated the biggest weight to Generac Holdings Inc. (NYSE:GNRC), around 2.13% of its 13F portfolio. Shellback Capital is also relatively very bullish on the stock, earmarking 1.99 percent of its 13F equity portfolio to GNRC.
Since Generac Holdings Inc. (NYSE:GNRC) has faced a decline in interest from the smart money, logic holds that there lies a certain "tier" of fund managers that elected to cut their full holdings last quarter. It's worth mentioning that John W. Rogers's Ariel Investments sold off the biggest investment of the "upper crust" of funds tracked by Insider Monkey, worth about $44.9 million in stock. Jack Woodruff's fund, Candlestick Capital Management, also said goodbye to its stock, about $34.8 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 11 funds last quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Generac Holdings Inc. (NYSE:GNRC) but similarly valued. These stocks are Markel Corporation (NYSE:MKL), Tradeweb Markets Inc. (NASDAQ:TW), Jacobs Engineering Group Inc. (NYSE:J), Plug Power, Inc. (NASDAQ:PLUG), Avangrid, Inc. (NYSE:AGR), Cincinnati Financial Corporation (NASDAQ:CINF), and Cognex Corporation (NASDAQ:CGNX). All of these stocks' market caps are similar to GNRC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MKL,36,941576,2 TW,31,330948,7 J,30,1038493,3 PLUG,21,734364,0 AGR,10,64954,-1 CINF,20,842405,1 CGNX,31,382597,3 Average,25.6,619334,2.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.6 hedge funds with bullish positions and the average amount invested in these stocks was $619 million. That figure was $560 million in GNRC's case. Markel Corporation (NYSE:MKL) is the most popular stock in this table. On the other hand Avangrid, Inc. (NYSE:AGR) is the least popular one with only 10 bullish hedge fund positions. Generac Holdings Inc. (NYSE:GNRC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GNRC is 58.6. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.2% in 2021 through April 12th and still beat the market by 1.5 percentage points. Hedge funds were also right about betting on GNRC as the stock returned 44.4% since the end of Q4 (through 4/12) 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.