At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
Is Greif, Inc. (NYSE:GEF) a buy here? Hedge funds are buying. The number of bullish hedge fund bets advanced by 1 lately. Our calculations also showed that GEF isn’t among the 30 most popular stocks among hedge funds. GEF was in 20 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 19 hedge funds in our database with GEF positions at the end of the previous quarter.
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 market by 32 percentage points since May 2014 through March 12, 2019 (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.
We’re going to check out the latest hedge fund action surrounding Greif, Inc. (NYSE:GEF).
How are hedge funds trading Greif, Inc. (NYSE:GEF)?
At Q4’s end, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in GEF over the last 14 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
The largest stake in Greif, Inc. (NYSE:GEF) was held by GAMCO Investors, which reported holding $33.2 million worth of stock at the end of September. It was followed by Arbiter Partners Capital Management with a $26.5 million position. Other investors bullish on the company included Marshall Wace LLP, AQR Capital Management, and Millennium Management.
As aggregate interest increased, key hedge funds were leading the bulls’ herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the most outsized position in Greif, Inc. (NYSE:GEF). Arrowstreet Capital had $2.2 million invested in the company at the end of the quarter. Minhua Zhang’s Weld Capital Management also made a $0.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace’s Marshall Wace LLP, Paul Tudor Jones’s Tudor Investment Corp, and Benjamin A. Smith’s Laurion Capital Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Greif, Inc. (NYSE:GEF) but similarly valued. These stocks are Piedmont Office Realty Trust, Inc. (NYSE:PDM), Pandora Media Inc (NYSE:P), Legg Mason, Inc. (NYSE:LM), and Tandem Diabetes Care Inc (NASDAQ:TNDM). This group of stocks’ market values resemble GEF’s market value.
|Ticker||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 24 hedge funds with bullish positions and the average amount invested in these stocks was $348 million. That figure was $109 million in GEF’s case. Pandora Media Inc (NYSE:P) is the most popular stock in this table. On the other hand Piedmont Office Realty Trust, Inc. (NYSE:PDM) is the least popular one with only 14 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately GEF wasn’t nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); GEF investors were disappointed as the stock returned 4.2% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.