Hedge Funds Are Selling Genco Shipping & Trading Limited (GNK)

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Genco Shipping & Trading Limited (NYSE:GNK).

Is Genco Shipping & Trading Limited (NYSE:GNK) undervalued? Hedge funds are taking a bearish view. The number of long hedge fund bets dropped by 1 recently. Our calculations also showed that GNK isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.

Nathaniel August - Mangrove Partners

Nathaniel August of Mangrove Partners

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a glance at the new hedge fund action surrounding Genco Shipping & Trading Limited (NYSE:GNK).

What does smart money think about Genco Shipping & Trading Limited (NYSE:GNK)?

At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards GNK over the last 17 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Centerbridge Partners was the largest shareholder of Genco Shipping & Trading Limited (NYSE:GNK), with a stake worth $96.5 million reported as of the end of September. Trailing Centerbridge Partners was Strategic Value Partners, which amassed a stake valued at $93.5 million. Mangrove Partners, 683 Capital Partners, and Renaissance Technologies 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 Strategic Value Partners allocated the biggest weight to Genco Shipping & Trading Limited (NYSE:GNK), around 24.07% of its 13F portfolio. Centerbridge Partners is also relatively very bullish on the stock, earmarking 17.53 percent of its 13F equity portfolio to GNK.

Seeing as Genco Shipping & Trading Limited (NYSE:GNK) has experienced bearish sentiment from the smart money, it’s easy to see that there were a few fund managers that elected to cut their positions entirely in the third quarter. Intriguingly, Paul Marshall and Ian Wace’s Marshall Wace sold off the biggest stake of all the hedgies tracked by Insider Monkey, comprising an estimated $0.3 million in stock. David E. Shaw’s fund, D E Shaw, also cut its stock, about $0.3 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 1 funds in the third quarter.

Let’s go over hedge fund activity in other stocks similar to Genco Shipping & Trading Limited (NYSE:GNK). These stocks are Digi International Inc. (NASDAQ:DGII), Inseego Corp. (NASDAQ:INSG), Karuna Therapeutics, Inc. (NASDAQ:KRTX), and Village Super Market, Inc. (NASDAQ:VLGEA). All of these stocks’ market caps match GNK’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DGII 12 49465 -1
INSG 8 16483 0
KRTX 9 22332 0
VLGEA 8 40571 0
Average 9.25 32213 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.25 hedge funds with bullish positions and the average amount invested in these stocks was $32 million. That figure was $211 million in GNK’s case. Digi International Inc. (NASDAQ:DGII) is the most popular stock in this table. On the other hand Inseego Corp. (NASDAQ:INSG) is the least popular one with only 8 bullish hedge fund positions. Genco Shipping & Trading Limited (NYSE:GNK) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on GNK as the stock returned 19.7% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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