Gencorp Inc (GY): Hedge Funds Are Bullish and Insiders Are Undecided, What Should You Do?

Page 1 of 2

In the eyes of many traders, hedge funds are viewed as useless, outdated financial tools of a forgotten age. Although there are more than 8,000 hedge funds trading today, Insider Monkey focuses on the bigwigs of this club, close to 525 funds. Analysts calculate that this group oversees the majority of the smart money’s total assets, and by monitoring their highest quality equity investments, we’ve spotted a number of investment strategies that have historically outpaced the broader indices. Our small-cap hedge fund strategy outperformed 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 outperformed the S&P 500 index by 33 percentage points in 11 months (find a sample of our picks).

Just as key, optimistic insider trading activity is another way to look at the marketplace. Obviously, there are a number of stimuli for an executive to downsize shares of his or her company, but only one, very simple reason why they would buy. Many empirical studies have demonstrated the market-beating potential of this method if investors know where to look (learn more here).

Thus, we’re going to discuss the newest info for Gencorp Inc (NYSE:GY).

Gencorp Inc (NYSE:GY)

What does the smart money think about Gencorp Inc (NYSE:GY)?

At the end of the second quarter, a total of 26 of the hedge funds we track held long positions in this stock, a change of 8% from the first quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their holdings considerably.

Out of the hedge funds we follow, Richard McGuire’s Marcato Capital Management had the most valuable position in Gencorp Inc (NYSE:GY), worth close to $93.7 million, comprising 9% of its total 13F portfolio. Coming in second is Mario Gabelli of GAMCO Investors, with a $85.2 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Remaining peers with similar optimism include Warren Lichtenstein’s Steel Partners, Zac Hirzel’s Hirzel Capital Management and Michael Blitzer’s Kingstown Capital Management.

As one would understandably expect, certain bigger names have jumped into Gencorp Inc (NYSE:GY) headfirst. Marcato Capital Management, managed by Richard McGuire, assembled the most valuable position in Gencorp Inc (NYSE:GY). Marcato Capital Management had 93.7 million invested in the company at the end of the quarter. Mario Gabelli’s GAMCO Investors also made a $85.2 million investment in the stock during the quarter. The following funds were also among the new GY investors: Warren Lichtenstein’s Steel Partners, Glenn Russell Dubin’s Highbridge Capital Management, and Zac Hirzel’s Hirzel Capital Management.

Insider trading activity in Gencorp Inc (NYSE:GY)

Insider buying is best served when the company in question has experienced transactions within the past six months. Over the last 180-day time period, Gencorp Inc (NYSE:GY) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

We’ll also review the relationship between both of these indicators in other stocks similar to Gencorp Inc (NYSE:GY). These stocks are Raytheon Company (NYSE:RTN), Northrop Grumman Corporation (NYSE:NOC), Textron Inc. (NYSE:TXT), and AerCap Holdings N.V. (NYSE:AER). All of these stocks are in the aerospace/defense – major diversified industry and their market caps are similar to GY’s market cap.

Page 1 of 2