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Hedge Funds Are Coming Back To Green Plains Inc. (GPRE)?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 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 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Green Plains Inc. (NASDAQ:GPRE) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Green Plains Inc. (NASDAQ:GPRE) was in 20 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 27. GPRE has seen an increase in hedge fund sentiment of late. There were 13 hedge funds in our database with GPRE positions at the end of the first quarter. Our calculations also showed that GPRE isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 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.

Nathaniel August - Mangrove Partners

Nathaniel August of Mangrove Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keeping this in mind let’s take a look at the recent hedge fund action regarding Green Plains Inc. (NASDAQ:GPRE).

What does smart money think about Green Plains Inc. (NASDAQ:GPRE)?

At second quarter’s end, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 54% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in GPRE over the last 20 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

More specifically, Mangrove Partners was the largest shareholder of Green Plains Inc. (NASDAQ:GPRE), with a stake worth $26 million reported as of the end of September. Trailing Mangrove Partners was Rubric Capital Management, which amassed a stake valued at $21.9 million. Renaissance Technologies, Arosa Capital Management, and D E Shaw 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 Mangrove Partners allocated the biggest weight to Green Plains Inc. (NASDAQ:GPRE), around 6.33% of its 13F portfolio. Rubric Capital Management is also relatively very bullish on the stock, dishing out 2.52 percent of its 13F equity portfolio to GPRE.

With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Arosa Capital Management, managed by Till Bechtolsheimer, established the most valuable position in Green Plains Inc. (NASDAQ:GPRE). Arosa Capital Management had $10.9 million invested in the company at the end of the quarter. Todd J. Kantor’s Encompass Capital Advisors also initiated a $8.6 million position during the quarter. The other funds with brand new GPRE positions are Israel Englander’s Millennium Management, David Greenspan’s Slate Path Capital, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Green Plains Inc. (NASDAQ:GPRE) but similarly valued. We will take a look at Sohu.com Limited (NASDAQ:SOHU), Preferred Apartment Communities Inc. (NYSE:APTS), MagnaChip Semiconductor Corporation (NYSE:MX), Sprague Resources LP (NYSE:SRLP), Community Health Systems, Inc. (NYSE:CYH), MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT), and CarParts.com, Inc. (NASDAQ:PRTS). This group of stocks’ market valuations are similar to GPRE’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SOHU 14 49621 4
APTS 10 10291 1
MX 25 172871 3
SRLP 1 580 -3
CYH 18 141485 -2
MCFT 21 130750 1
PRTS 14 68315 9
Average 14.7 81988 1.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.7 hedge funds with bullish positions and the average amount invested in these stocks was $82 million. That figure was $115 million in GPRE’s case. MagnaChip Semiconductor Corporation (NYSE:MX) is the most popular stock in this table. On the other hand Sprague Resources LP (NYSE:SRLP) is the least popular one with only 1 bullish hedge fund positions. Green Plains Inc. (NASDAQ:GPRE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GPRE is 71.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 24.8% in 2020 through the end of third quarter and still beat the market by 19.3 percentage points. Hedge funds were also right about betting on GPRE as the stock returned 51.5% during Q3 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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