In this article we will check out the progression of hedge fund sentiment towards Generac Holdings Inc. (NYSE:GNRC) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Generac Holdings Inc. (NYSE:GNRC) was in 29 hedge funds' portfolios at the end of March. GNRC investors should pay attention to a decrease in enthusiasm from smart money of late. There were 32 hedge funds in our database with GNRC positions at the end of the previous quarter. Our calculations also showed that GNRC 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.
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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 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, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one as well as this tiny cannabis play. 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 take a look at the key hedge fund action surrounding Generac Holdings Inc. (NYSE:GNRC).
What have hedge funds been doing with Generac Holdings Inc. (NYSE:GNRC)?
Heading into the second quarter of 2020, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from one quarter earlier. On the other hand, there were a total of 17 hedge funds with a bullish position in GNRC a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Impax Asset Management was the largest shareholder of Generac Holdings Inc. (NYSE:GNRC), with a stake worth $79.8 million reported as of the end of September. Trailing Impax Asset Management was Ariel Investments, which amassed a stake valued at $30.2 million. Arosa Capital Management, Citadel Investment Group, and PEAK6 Capital Management 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 Arosa Capital Management allocated the biggest weight to Generac Holdings Inc. (NYSE:GNRC), around 2.14% of its 13F portfolio. BeaconLight Capital is also relatively very bullish on the stock, setting aside 1.84 percent of its 13F equity portfolio to GNRC.
Because Generac Holdings Inc. (NYSE:GNRC) has faced falling interest from the entirety of the hedge funds we track, it's easy to see that there is a sect of hedgies who were dropping their full holdings last quarter. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital cut the biggest investment of all the hedgies followed by Insider Monkey, totaling an estimated $35.4 million in stock. Jim Simons (founder)'s fund, Renaissance Technologies, also dropped its stock, about $25.8 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 3 funds last quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Generac Holdings Inc. (NYSE:GNRC) but similarly valued. These stocks are Bunge Limited (NYSE:BG), Avalara, Inc. (NYSE:AVLR), MGM Resorts International (NYSE:MGM), and Post Holdings Inc (NYSE:POST). This group of stocks' market valuations match GNRC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BG,39,543155,2 AVLR,34,970359,-13 MGM,50,943490,0 POST,31,1195411,-7 Average,38.5,913104,-4.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 38.5 hedge funds with bullish positions and the average amount invested in these stocks was $913 million. That figure was $192 million in GNRC's case. MGM Resorts International (NYSE:MGM) is the most popular stock in this table. On the other hand Post Holdings Inc (NYSE:POST) is the least popular one with only 31 bullish hedge fund positions. Compared to these stocks Generac Holdings Inc. (NYSE:GNRC) is even less popular than POST. 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 but managed to beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on GNRC, though not to the same extent, as the stock returned 19.4% during the second quarter (through the end of May) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.