We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Greif, Inc. (NYSE:GEF)? The smart money sentiment can provide an answer to this question.
Greif, Inc. (NYSE:GEF) was in 18 hedge funds’ portfolios at the end of December. GEF shareholders have witnessed an increase in support from the world’s most elite money managers recently. There were 15 hedge funds in our database with GEF positions at the end of the previous quarter. Our calculations also showed that GEF isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
At the moment there are plenty of signals market participants use to assess publicly traded companies. A duo of the most useful signals are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the top picks of the best hedge fund managers can trounce the S&P 500 by a very impressive margin (see the details here).
Paul Tudor Jones of Tudor Investment Corp
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a glance at the latest hedge fund action encompassing Greif, Inc. (NYSE:GEF).
How have hedgies been trading Greif, Inc. (NYSE:GEF)?
Heading into the first quarter of 2020, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from one quarter earlier. By comparison, 20 hedge funds held shares or bullish call options in GEF a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, GAMCO Investors was the largest shareholder of Greif, Inc. (NYSE:GEF), with a stake worth $34.8 million reported as of the end of September. Trailing GAMCO Investors was Arbiter Partners Capital Management, which amassed a stake valued at $15.8 million. Citadel Investment Group, Arrowstreet Capital, and Marshall Wace LLP 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 Arbiter Partners Capital Management allocated the biggest weight to Greif, Inc. (NYSE:GEF), around 2.29% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, dishing out 0.28 percent of its 13F equity portfolio to GEF.
With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the largest position in Greif, Inc. (NYSE:GEF). Arrowstreet Capital had $7.5 million invested in the company at the end of the quarter. Ray Dalio’s Bridgewater Associates also made a $0.5 million investment in the stock during the quarter. The other funds with brand new GEF positions are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Paul Tudor Jones’s Tudor Investment Corp, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.
Let’s go over hedge fund activity in other stocks similar to Greif, Inc. (NYSE:GEF). We will take a look at Inter Parfums, Inc. (NASDAQ:IPAR), Kosmos Energy Ltd (NYSE:KOS), Scorpio Tankers Inc. (NYSE:STNG), and John Wiley & Sons Inc (NYSE:JW). All of these stocks’ market caps match GEF’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IPAR | 15 | 67320 | 1 |
| KOS | 30 | 133090 | 5 |
| STNG | 33 | 233788 | 8 |
| JW | 21 | 81448 | 1 |
| Average | 24.75 | 128912 | 3.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.75 hedge funds with bullish positions and the average amount invested in these stocks was $129 million. That figure was $87 million in GEF’s case. Scorpio Tankers Inc. (NYSE:STNG) is the most popular stock in this table. On the other hand Inter Parfums, Inc. (NASDAQ:IPAR) is the least popular one with only 15 bullish hedge fund positions. Greif, Inc. (NYSE:GEF) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately GEF wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); GEF investors were disappointed as the stock returned -34.3% 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 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
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.
