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Genpact Limited (G): Hedge Fund Sentiment Unchanged

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed over the past few years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that hedge funds do have great stock picking skills, so let’s take a glance at the smart money sentiment towards Genpact Limited (NYSE:G).

Genpact Limited (NYSE:G) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 21 hedge funds’ portfolios at the end of September. 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 ICU Medical, Inc. (NASDAQ:ICUI), Ligand Pharmaceuticals Inc. (NASDAQ:LGND), and Gentex Corporation (NASDAQ:GNTX) to gather more data points.

If you’d ask most investors, hedge funds are viewed as worthless, old investment vehicles of years past. While there are over 8,000 funds in operation at the moment, We hone in on the elite of this club, about 700 funds. These money managers oversee most of all hedge funds’ total asset base, and by following their matchless picks, Insider Monkey has discovered a few investment strategies that have historically outperformed the S&P 500 index. Insider Monkey’s flagship hedge fund strategy surpassed the S&P 500 index by 6 percentage points per annum since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 24% since February 2017 (through December 3rd) even though the market was up nearly 23% during the same period. We just shared a list of 11 short targets in our latest quarterly update.

D. E. Shaw

Let’s analyze the recent hedge fund action regarding Genpact Limited (NYSE:G).

Hedge fund activity in Genpact Limited (NYSE:G)

At the end of the third quarter, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, no change from the second quarter of 2018. On the other hand, there were a total of 21 hedge funds with a bullish position in G at the beginning of this year. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

G_dec2018

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, D. E. Shaw’s D E Shaw has the number one position in Genpact Limited (NYSE:G), worth close to $109.1 million, corresponding to 0.1% of its total 13F portfolio. The second most bullish fund manager is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $98.4 million position; 0.2% of its 13F portfolio is allocated to the stock. Remaining peers with similar optimism consist of Richard S. Pzena’s Pzena Investment Management, Cliff Asness’s AQR Capital Management and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Due to the fact that Genpact Limited (NYSE:G) has faced a decline in interest from the aggregate hedge fund industry, we can see that there lies a certain “tier” of hedge funds that slashed their full holdings in the third quarter. Interestingly, Michael Platt and William Reeves’s BlueCrest Capital Mgmt. cut the biggest investment of the “upper crust” of funds monitored by Insider Monkey, comprising close to $1.4 million in stock. Paul Tudor Jones’s fund, Tudor Investment Corp, also said goodbye to its stock, about $1.2 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out hedge fund activity in other stocks similar to Genpact Limited (NYSE:G). We will take a look at ICU Medical, Inc. (NASDAQ:ICUI), Ligand Pharmaceuticals Inc. (NASDAQ:LGND), Gentex Corporation (NASDAQ:GNTX), and Murphy Oil Corporation (NYSE:MUR). This group of stocks’ market caps are similar to G’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ICUI 35 566997 2
LGND 28 544013 6
GNTX 27 312500 1
MUR 23 363595 0
Average 28.25 446776 2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.25 hedge funds with bullish positions and the average amount invested in these stocks was $447 million. That figure was $547 million in G’s case. ICU Medical, Inc. (NASDAQ:ICUI) is the most popular stock in this table. On the other hand Murphy Oil Corporation (NYSE:MUR) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks Genpact Limited (NYSE:G) is even less popular than MUR. 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.

Disclosure: None. This article was originally published at Insider Monkey.

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