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Genworth Financial Inc (GNW): These Hedge Funds Cashed Out Too Early

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have gone over 730 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 28th. In this article we look at what those investors think of Genworth Financial Inc (NYSE:GNW).

Genworth Financial Inc (NYSE:GNW) investors should be aware of a decrease in hedge fund interest in recent months. Our calculations also showed that GNW isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Bill Miller

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a peek at the fresh hedge fund action regarding Genworth Financial Inc (NYSE:GNW).

Hedge fund activity in Genworth Financial Inc (NYSE:GNW)

At Q2’s end, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the previous quarter. On the other hand, there were a total of 22 hedge funds with a bullish position in GNW a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with GNW Positions

Among these funds, Miller Value Partners held the most valuable stake in Genworth Financial Inc (NYSE:GNW), which was worth $76.7 million at the end of the second quarter. On the second spot was Shah Capital Management which amassed $24.6 million worth of shares. Moreover, Maso Capital, Citadel Investment Group, and Alpine Associates were also bullish on Genworth Financial Inc (NYSE:GNW), allocating a large percentage of their portfolios to this stock.

Because Genworth Financial Inc (NYSE:GNW) has witnessed bearish sentiment from hedge fund managers, it’s easy to see that there was a specific group of hedge funds that elected to cut their positions entirely heading into Q3. At the top of the heap, Anand Parekh’s Alyeska Investment Group dumped the biggest stake of the “upper crust” of funds watched by Insider Monkey, comprising about $6.6 million in stock, and Carl Tiedemann and Michael Tiedemann’s TIG Advisors was right behind this move, as the fund said goodbye to about $3 million worth. These moves are interesting, as aggregate hedge fund interest fell by 2 funds heading into Q3.

Let’s now take a look at hedge fund activity in other stocks similar to Genworth Financial Inc (NYSE:GNW). We will take a look at NGL Energy Partners LP (NYSE:NGL), The Bank of N.T. Butterfield & Son Limited (NYSE:NTB), Fabrinet (NYSE:FN), and Varonis Systems Inc (NASDAQ:VRNS). All of these stocks’ market caps match GNW’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NGL 4 40263 0
NTB 13 120602 -2
FN 25 169778 5
VRNS 24 350819 -1
Average 16.5 170366 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $170 million. That figure was $170 million in GNW’s case. Fabrinet (NYSE:FN) is the most popular stock in this table. On the other hand NGL Energy Partners LP (NYSE:NGL) is the least popular one with only 4 bullish hedge fund positions. Genworth Financial Inc (NYSE:GNW) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on GNW as the stock returned 18.6% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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