The elite funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Genesis Healthcare Inc (NYSE:GEN) from the perspective of those elite funds.
Genesis Healthcare Inc was in 12 hedge funds’ portfolios at the end of the third quarter of 2015. GEN investors should be aware of a decrease in enthusiasm from smart money lately. There were 14 hedge funds in our database with GEN positions at the end of the previous quarter. At the end of this article we will also compare GEN to other stocks, including Rush Enterprises, Inc. (NASDAQ:RUSHB), State Auto Financial (NASDAQ:STFC), and Textainer Group Holdings Limited (NYSE:TGH) to get a better sense of its popularity.
Follow Genesis Healthcare Inc. (NYSE:GEN)
Follow Genesis Healthcare Inc. (NYSE:GEN)
Today there are a lot of formulas investors have at their disposal to grade their holdings. A duo of the most underrated formulas are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the top fund managers can trounce the broader indices by a solid margin (see the details here).
With all of this in mind, we’re going to take a look at the recent action encompassing Genesis Healthcare Inc (NYSE:GEN).
Hedge fund activity in Genesis Healthcare Inc (NYSE:GEN)
Heading into Q4, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a decrease of 14% from the second quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Cannell Capital, managed by J. Carlo Cannell, holds the biggest position in Genesis Healthcare Inc (NYSE:GEN). Cannell Capital has a $9.5 million position in the stock, comprising 3.6% of its 13F portfolio. The second largest stake is held by Deerfield Management, managed by James E. Flynn, which holds a $9.4 million position; 0.4% of its 13F portfolio is allocated to the company. Remaining professional money managers that are bullish contain Phill Gross and Robert Atchinson’s Adage Capital Management, J. Alan Reid, Jr.’s Forward Management, and Krishen Sud’s Sivik Global Healthcare.
Seeing as Genesis Healthcare Inc (NYSE:GEN) has witnessed falling interest from the aggregate hedge fund industry, it’s easy to see that there exists a select few fund managers that slashed their full holdings in the third quarter. It’s worth mentioning that Ken Griffin’s Citadel Investment Group dumped the biggest stake of the “upper crust” of funds monitored by Insider Monkey, valued at about $1.2 million in stock, and John Overdeck and David Siegel’s Two Sigma Advisors was right behind this move, as the fund said goodbye to about $0.2 million worth of shares. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Genesis Healthcare Inc (NYSE:GEN). These stocks are Rush Enterprises, Inc. (NASDAQ:RUSHB), State Auto Financial (NASDAQ:STFC), Textainer Group Holdings Limited (NYSE:TGH), and Inogen Inc (NASDAQ:INGN). This group of stocks’ market values are similar to GEN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RUSHB | 4 | 31691 | -2 |
| STFC | 4 | 25290 | -3 |
| TGH | 7 | 6582 | -1 |
| INGN | 18 | 90344 | 2 |
As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $38 million. That figure was $33 million in GEN’s case. Inogen Inc (NASDAQ:INGN) is the most popular stock in this table. On the other hand Rush Enterprises, Inc. (NASDAQ:RUSHB) is the least popular one with only 4 bullish hedge fund positions. Genesis Healthcare Inc (NYSE:GEN) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard INGN might be a better candidate to consider a long position.
