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Genesco Inc. (GCO): Are Hedge Funds Right About This Stock?

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Genesco Inc. (NYSE:GCO) investors should pay attention to a decrease in support from the world’s most elite money managers recently.

In the eyes of most market participants, hedge funds are seen as unimportant, old financial vehicles of the past. While there are greater than 8000 funds trading today, we choose to focus on the masters of this group, around 450 funds. It is estimated that this group controls the lion’s share of all hedge funds’ total asset base, and by tracking their best picks, we have unearthed a number of investment strategies that have historically outstripped the broader indices. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 23.3 percentage points in 8 months (see all of our picks from August).

Equally as important, optimistic insider trading activity is a second way to parse down the stock market universe. Obviously, there are a number of incentives for an upper level exec to get rid of shares of his or her company, but just one, very simple reason why they would initiate a purchase. Plenty of academic studies have demonstrated the market-beating potential of this tactic if “monkeys” understand where to look (learn more here).

Keeping this in mind, it’s important to take a peek at the key action surrounding Genesco Inc. (NYSE:GCO).

How are hedge funds trading Genesco Inc. (NYSE:GCO)?

In preparation for this quarter, a total of 13 of the hedge funds we track were bullish in this stock, a change of -13% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings considerably.

When looking at the hedgies we track, Ken Fisher’s Fisher Asset Management had the largest position in Genesco Inc. (NYSE:GCO), worth close to $47.1 million, comprising 0.1% of its total 13F portfolio. On Fisher Asset Management’s heels is Richard Chilton of Chilton Investment Company, with a $30.1 million position; 0.8% of its 13F portfolio is allocated to the company. Some other hedgies that hold long positions include D. E. Shaw’s D E Shaw, Jeffrey Vinik’s Vinik Asset Management and Israel Englander’s Millennium Management.

Judging by the fact that Genesco Inc. (NYSE:GCO) has witnessed declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of funds that decided to sell off their positions entirely at the end of the first quarter. Intriguingly, Joe DiMenna’s ZWEIG DIMENNA PARTNERS said goodbye to the biggest investment of all the hedgies we track, totaling an estimated $6 million in stock.. James Dondero’s fund, Highland Capital Management, also cut its stock, about $5.6 million worth. These moves are interesting, as total hedge fund interest fell by 2 funds at the end of the first quarter.

How are insiders trading Genesco Inc. (NYSE:GCO)?

Bullish insider trading is most useful when the company in focus has experienced transactions within the past half-year. Over the latest six-month time period, Genesco Inc. (NYSE:GCO) has experienced zero unique insiders purchasing, and 4 insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to Genesco Inc. (NYSE:GCO). These stocks are Jos. A. Bank Clothiers Inc (NASDAQ:JOSB), The Men’s Wearhouse, Inc. (NYSE:MW), Ann Inc (NYSE:ANN), Wacoal Holdings Corporation (ADR) (NASDAQ:WACLY), and Express, Inc. (NYSE:EXPR). All of these stocks are in the apparel stores industry and their market caps resemble GCO’s market cap.

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