Did Hedge Funds Drop The Ball On Greenhill & Co., Inc. (GHL) ?

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Greenhill & Co., Inc. (NYSE:GHL) in this article.

Hedge fund interest in Greenhill & Co., Inc. (NYSE:GHL) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Pfenex Inc (NYSE:PFNX), RR Donnelley & Sons Company (NYSE:RRD), and Denison Mines Corp (NYSE:DNN) to gather more data points. Our calculations also showed that GHL isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

David Keidan of Buckingham Capital

David Keidan of Buckingham Capital

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds‘ buy/sell signals. We’re going to check out the latest hedge fund action encompassing Greenhill & Co., Inc. (NYSE:GHL).

How have hedgies been trading Greenhill & Co., Inc. (NYSE:GHL)?

Heading into the fourth quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in GHL over the last 17 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

More specifically, Fisher Asset Management was the largest shareholder of Greenhill & Co., Inc. (NYSE:GHL), with a stake worth $6.9 million reported as of the end of September. Trailing Fisher Asset Management was Rutabaga Capital Management, which amassed a stake valued at $4.9 million. Millennium Management, Buckingham Capital Management, and Citadel Investment Group 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 Rutabaga Capital Management allocated the biggest weight to Greenhill & Co., Inc. (NYSE:GHL), around 1.73% of its 13F portfolio. Buckingham Capital Management is also relatively very bullish on the stock, dishing out 0.38 percent of its 13F equity portfolio to GHL.

Judging by the fact that Greenhill & Co., Inc. (NYSE:GHL) has experienced declining sentiment from the aggregate hedge fund industry, we can see that there was a specific group of fund managers who were dropping their positions entirely heading into Q4. Intriguingly, Renaissance Technologies sold off the largest investment of all the hedgies watched by Insider Monkey, worth close to $1.6 million in stock. Bill Miller’s fund, Miller Value Partners, also dumped its stock, about $1 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks similar to Greenhill & Co., Inc. (NYSE:GHL). We will take a look at Pfenex Inc (NYSE:PFNX), RR Donnelley & Sons Company (NYSE:RRD), Denison Mines Corp (NYSE:DNN), and Scholar Rock Holding Corporation (NASDAQ:SRRK). This group of stocks’ market caps are closest to GHL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PFNX 14 35852 2
RRD 15 15735 3
DNN 3 1431 -1
SRRK 7 29330 -1
Average 9.75 20587 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $21 million. That figure was $21 million in GHL’s case. RR Donnelley & Sons Company (NYSE:RRD) is the most popular stock in this table. On the other hand Denison Mines Corp (NYSE:DNN) is the least popular one with only 3 bullish hedge fund positions. Greenhill & Co., Inc. (NYSE:GHL) 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 GHL as the stock returned 29.6% 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.