Genpact Limited (G): Are Hedge Funds Right About This Stock?

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Ackman’s recent Valeant losses). However, it is still good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Genpact Limited (NYSE:G).

Genpact Limited (NYSE:G) has experienced a decrease in support from the world’s most elite money managers of late. G was in 17 hedge funds’ portfolios at the end of the third quarter of 2015. There were 22 hedge funds in our database with G positions at the end of the previous quarter. At the end of this article we will also compare G to other stocks including ADT Corp (NYSE:ADT), FireEye Inc (NASDAQ:FEYE), and Edgewell Personal Care Company (NYSE:EPC) to get a better sense of its popularity.

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With all of this in mind, we’re going to check out the key action encompassing Genpact Limited (NYSE:G).

What does the smart money think about Genpact Limited (NYSE:G)?

At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -23% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Eminence Capital, managed by Ricky Sandler, holds the largest position in Genpact Limited (NYSE:G). Eminence Capital has a $189.4 million position in the stock, comprising 2.9% of its 13F portfolio. Coming in second is D E Shaw, holding a $51.2 million position; 0.1% of its 13F portfolio is allocated to the company. Other members of the smart money that are bullish consist of Richard S. Pzena’s Pzena Investment Management, Cliff Asness’ AQR Capital Management and Ken Fisher’s Fisher Asset Management.

Due to the fact that Genpact Limited (NYSE:G) has witnessed falling interest from the smart money, logic holds that there were a few fund managers that slashed their positions entirely heading into Q4. At the top of the heap, Anand Parekh’s Alyeska Investment Group said goodbye to the largest stake of all the hedgies watched by Insider Monkey, totaling about $17.6 million in stock, and Aleem Mawji’s Nebula Capital was right behind this move, as the fund dropped about $5 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 5 funds heading into Q4.

Let’s now review hedge fund activity in other stocks similar to Genpact Limited (NYSE:G). These stocks are ADT Corp (NYSE:ADT), FireEye Inc (NASDAQ:FEYE), Edgewell Personal Care Company (NYSE:EPC), and Nuance Communications Inc. (NASDAQ:NUAN). This group of stocks’ market valuations match G’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ADT 22 210500 -6
FEYE 37 383976 2
EPC 34 749305 18
NUAN 30 1153747 5

As you can see these stocks had an average of 30.75 hedge funds with bullish positions and the average amount invested in these stocks was $624 million. That figure was $375 million in G’s case. FireEye Inc (NASDAQ:FEYE) is the most popular stock in this table. On the other hand ADT Corp (NYSE:ADT) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks Genpact Limited (NYSE:G) is even less popular than ADT. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.