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Hedge Funds Have Never Been More Bullish On Genie Energy Ltd (GNE)

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Genie Energy Ltd (NYSE:GNE) and determine whether hedge funds skillfully traded this stock.

Genie Energy Ltd (NYSE:GNE) was in 12 hedge funds’ portfolios at the end of the first quarter of 2020. GNE has seen an increase in hedge fund sentiment recently. There were 10 hedge funds in our database with GNE holdings at the end of the previous quarter. Our calculations also showed that GNE isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 58 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a look at the key hedge fund action regarding Genie Energy Ltd (NYSE:GNE).

How have hedgies been trading Genie Energy Ltd (NYSE:GNE)?

Heading into the second quarter of 2020, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards GNE over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Renaissance Technologies, holds the largest position in Genie Energy Ltd (NYSE:GNE). Renaissance Technologies has a $4.4 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $0.6 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that are bullish include Kahn Brothers, Israel Englander’s Millennium Management and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position Kahn Brothers allocated the biggest weight to Genie Energy Ltd (NYSE:GNE), around 0.08% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, dishing out 0.04 percent of its 13F equity portfolio to GNE.

With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls’ herd. Engineers Gate Manager, managed by Greg Eisner, created the most outsized position in Genie Energy Ltd (NYSE:GNE). Engineers Gate Manager had $0.2 million invested in the company at the end of the quarter. Peter Algert and Kevin Coldiron’s Algert Coldiron Investors also made a $0.1 million investment in the stock during the quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Genie Energy Ltd (NYSE:GNE) but similarly valued. These stocks are Secoo Holding Limited (NASDAQ:SECO), Cutera, Inc. (NASDAQ:CUTR), Mesabi Trust (NYSE:MSB), and EVI Industries Inc (NYSE:EVI). This group of stocks’ market caps are similar to GNE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SECO 3 16793 -1
CUTR 12 35456 -2
MSB 2 10828 -6
EVI 1 12505 -2
Average 4.5 18896 -2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 4.5 hedge funds with bullish positions and the average amount invested in these stocks was $19 million. That figure was $7 million in GNE’s case. Cutera, Inc. (NASDAQ:CUTR) is the most popular stock in this table. On the other hand EVI Industries Inc (NYSE:EVI) is the least popular one with only 1 bullish hedge fund positions. Genie Energy Ltd (NYSE:GNE) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately GNE wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on GNE were disappointed as the stock returned 3.6% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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