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Hedge Fund Consensus Stocks vs. Genpact Limited (G) In 2019

We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained more than 57% each. Hedge funds’ top 3 stock picks returned 44.6% this year and beat the S&P 500 ETFs by almost 14 percentage points. That’s a big deal. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Genpact Limited (NYSE:G) was in 35 hedge funds’ portfolios at the end of the third quarter of 2019. G investors should be aware of an increase in enthusiasm from smart money recently. There were 26 hedge funds in our database with G holdings at the end of the previous quarter. Our calculations also showed that G isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

David E. Shaw of D.E. Shaw

David E. Shaw of D.E. Shaw

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind let’s view the new hedge fund action surrounding Genpact Limited (NYSE:G).

How have hedgies been trading Genpact Limited (NYSE:G)?

At the end of the third quarter, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 35% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards G over the last 17 quarters. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

Is G A Good Stock To Buy?

Among these funds, Arrowstreet Capital held the most valuable stake in Genpact Limited (NYSE:G), which was worth $158.6 million at the end of the third quarter. On the second spot was D E Shaw which amassed $155.8 million worth of shares. Junto Capital Management, Millennium 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 Dalton Investments allocated the biggest weight to Genpact Limited (NYSE:G), around 11.34% of its 13F portfolio. Junto Capital Management is also relatively very bullish on the stock, dishing out 4.94 percent of its 13F equity portfolio to G.

Consequently, some big names have jumped into Genpact Limited (NYSE:G) headfirst. Echo Street Capital Management, managed by Greg Poole, established the most valuable position in Genpact Limited (NYSE:G). Echo Street Capital Management had $25.5 million invested in the company at the end of the quarter. Anand Parekh’s Alyeska Investment Group also made a $22.5 million investment in the stock during the quarter. The following funds were also among the new G investors: Phill Gross and Robert Atchinson’s Adage Capital Management, Mark Coe’s Intrinsic Edge Capital, and David Harding’s Winton Capital Management.

Let’s now review hedge fund activity in other stocks similar to Genpact Limited (NYSE:G). We will take a look at China Southern Airlines Co Ltd (NYSE:ZNH), Albemarle Corporation (NYSE:ALB), Ralph Lauren Corporation (NYSE:RL), and Cabot Oil & Gas Corporation (NYSE:COG). This group of stocks’ market valuations are similar to G’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ZNH 2 12318 1
ALB 17 148538 -1
RL 31 842866 -4
COG 38 667348 1
Average 22 417768 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $418 million. That figure was $862 million in G’s case. Cabot Oil & Gas Corporation (NYSE:COG) is the most popular stock in this table. On the other hand China Southern Airlines Co Ltd (NYSE:ZNH) is the least popular one with only 2 bullish hedge fund positions. Genpact Limited (NYSE:G) 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 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on G as the stock returned 58.5% in 2019 (through December 23rd) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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