Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Genpact Limited (NYSE:G) to find out whether there were any major changes in hedge funds’ views.
Is Genpact Limited (NYSE:G) worth your attention right now? The smart money was getting less bullish. The number of long hedge fund positions shrunk by 8 lately. Genpact Limited (NYSE:G) was in 23 hedge funds’ portfolios at the end of March. The all time high for this statistic is 38. Our calculations also showed that G isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 S&P 500 ETFs by 115 percentage points since March 2017 (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.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we’re going to analyze the key hedge fund action regarding Genpact Limited (NYSE:G).
Do Hedge Funds Think G Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of -26% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in G over the last 23 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Genpact Limited (NYSE:G) was held by Arrowstreet Capital, which reported holding $83.2 million worth of stock at the end of December. It was followed by Two Sigma Advisors with a $34.6 million position. Other investors bullish on the company included D E Shaw, Millennium Management, and Pzena Investment Management. In terms of the portfolio weights assigned to each position Dalton Investments allocated the biggest weight to Genpact Limited (NYSE:G), around 10.08% of its 13F portfolio. Old Well Partners is also relatively very bullish on the stock, setting aside 2.83 percent of its 13F equity portfolio to G.
Seeing as Genpact Limited (NYSE:G) has witnessed bearish sentiment from hedge fund managers, logic holds that there were a few hedgies that elected to cut their positions entirely by the end of the first quarter. At the top of the heap, Anand Parekh’s Alyeska Investment Group dumped the biggest stake of all the hedgies monitored by Insider Monkey, totaling about $27.8 million in stock. Vikas Lunia’s fund, Lunia Capital, also said goodbye to its stock, about $6.7 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 8 funds by the end of the first quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Genpact Limited (NYSE:G) but similarly valued. These stocks are Casey’s General Stores, Inc. (NASDAQ:CASY), RenaissanceRe Holdings Ltd. (NYSE:RNR), Knight-Swift Transportation Holdings Inc. (NYSE:KNX), DXC Technology Company (NYSE:DXC), Syneos Health, Inc. (NASDAQ:SYNH), Federal Realty Investment Trust (NYSE:FRT), and Voya Financial Inc (NYSE:VOYA). This group of stocks’ market caps match G’s market cap.
|No of HFs with positions
|Total Value of HF Positions (x1000)
|Change in HF Position
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.7 hedge funds with bullish positions and the average amount invested in these stocks was $500 million. That figure was $272 million in G’s case. Voya Financial Inc (NYSE:VOYA) is the most popular stock in this table. On the other hand Casey’s General Stores, Inc. (NASDAQ:CASY) is the least popular one with only 11 bullish hedge fund positions. Genpact Limited (NYSE:G) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for G is 34.5. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and beat the market by 7.7 percentage points. A small number of hedge funds were also right about betting on G, though not to the same extent, as the stock returned 12.2% since the end of Q1 (through July 16th) and outperformed the market.
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Disclosure: None. This article was originally published at Insider Monkey.