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Here is How Hedge Funds Traded Genesis Energy, L.P. (GEL) During The Crash

In this article you are going to find out whether hedge funds think Genesis Energy, L.P. (NYSE:GEL) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Genesis Energy, L.P. (NYSE:GEL) has seen an increase in enthusiasm from smart money in recent months. GEL was in 4 hedge funds’ portfolios at the end of March. There were 1 hedge funds in our database with GEL holdings at the end of the previous quarter. Our calculations also showed that GEL 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.

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 72% since March 2017 and outperformed the S&P 500 ETFs by more than 44 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.

Xiniya Earnings Call Transcript XNY 2014 Q3

New York Stock Exchange

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. Keeping this in mind we’re going to take a look at the fresh hedge fund action surrounding Genesis Energy, L.P. (NYSE:GEL).

What does smart money think about Genesis Energy, L.P. (NYSE:GEL)?

At the end of the first quarter, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 300% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GEL over the last 18 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.

According to Insider Monkey’s hedge fund database, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital has the most valuable position in Genesis Energy, L.P. (NYSE:GEL), worth close to $3.9 million, corresponding to less than 0.1%% of its total 13F portfolio. Coming in second is Marshall Wace LLP, managed by Paul Marshall and Ian Wace, which holds a $2.3 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other peers that hold long positions include Warren Lammert’s Granite Point Capital, and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Granite Point Capital allocated the biggest weight to Genesis Energy, L.P. (NYSE:GEL), around 0.4% of its 13F portfolio. Marshall Wace LLP is also relatively very bullish on the stock, designating 0.02 percent of its 13F equity portfolio to GEL.

As aggregate interest increased, specific money managers have been driving this bullishness. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, assembled the biggest position in Genesis Energy, L.P. (NYSE:GEL). Marshall Wace LLP had $2.3 million invested in the company at the end of the quarter. Warren Lammert’s Granite Point Capital also made a $0.7 million investment in the stock during the quarter. The only other fund with a brand new GEL position is Ken Griffin’s Citadel Investment Group.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Genesis Energy, L.P. (NYSE:GEL) but similarly valued. These stocks are B. Riley Financial, Inc. (NASDAQ:RILY), Vectrus Inc (NYSE:VEC), Kala Pharmaceuticals, Inc. (NASDAQ:KALA), and Bain Capital Specialty Finance, Inc. (NYSE:BCSF). This group of stocks’ market caps are closest to GEL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RILY 14 71858 -2
VEC 15 55085 2
KALA 18 183294 8
BCSF 8 13111 0
Average 13.75 80837 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $81 million. That figure was $7 million in GEL’s case. Kala Pharmaceuticals, Inc. (NASDAQ:KALA) is the most popular stock in this table. On the other hand Bain Capital Specialty Finance, Inc. (NYSE:BCSF) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Genesis Energy, L.P. (NYSE:GEL) is even less popular than BCSF. Hedge funds clearly dropped the ball on GEL as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on GEL as the stock returned 109.8% so far in the second quarter and outperformed the market by an even larger margin.

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

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