Is GNK A Good Stock To Buy Now?

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Genco Shipping & Trading Limited (NYSE:GNK).

Is GNK a good stock to buy now? Hedge fund interest in Genco Shipping & Trading Limited (NYSE:GNK) shares was flat at the end of last quarter. This is usually a negative indicator. 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 for a quick look at the top 5 stocks). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as CURO Group Holdings Corp. (NYSE:CURO), Cheetah Mobile Inc (NYSE:CMCM), and MidWestOne Financial Group, Inc. (NASDAQ:MOFG) to gather more data points.

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 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 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.

David Siegel of Two Sigma Advisors

David Siegel of Two Sigma Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we’re going to go over the recent hedge fund action surrounding Genco Shipping & Trading Limited (NYSE:GNK).

Do Hedge Funds Think GNK Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2020, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 12 hedge funds with a bullish position in GNK a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is GNK A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, Centerbridge Partners, managed by Mark T. Gallogly, holds the number one position in Genco Shipping & Trading Limited (NYSE:GNK). Centerbridge Partners has a $72.4 million position in the stock, comprising 8.1% of its 13F portfolio. The second most bullish fund manager is Strategic Value Partners, managed by Victor Khosla, which holds a $56.3 million position; the fund has 45.4% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish consist of Nathaniel August’s Mangrove Partners, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Ari Zweiman’s 683 Capital Partners. 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 45.38% of its 13F portfolio. Centerbridge Partners is also relatively very bullish on the stock, dishing out 8.1 percent of its 13F equity portfolio to GNK.

Due to the fact that Genco Shipping & Trading Limited (NYSE:GNK) has faced declining sentiment from hedge fund managers, it’s easy to see that there lies a certain “tier” of money managers who sold off their positions entirely last quarter. It’s worth mentioning that Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital dumped the biggest position of the “upper crust” of funds tracked by Insider Monkey, totaling an estimated $0.3 million in stock, and John Overdeck and David Siegel’s Two Sigma Advisors was right behind this move, as the fund said goodbye to about $0.1 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Genco Shipping & Trading Limited (NYSE:GNK) but similarly valued. These stocks are CURO Group Holdings Corp. (NYSE:CURO), Cheetah Mobile Inc (NYSE:CMCM), MidWestOne Financial Group, Inc. (NASDAQ:MOFG), SCVX Corp. (NYSE:SCVX), Solaris Oilfield Infrastructure, Inc. (NYSE:SOI), Cassava Sciences, Inc. (NASDAQ:SAVA), and DXP Enterprises Inc (NASDAQ:DXPE). This group of stocks’ market caps are similar to GNK’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CURO 12 28119 1
CMCM 4 4087 -1
MOFG 7 5296 -2
SCVX 17 80020 4
SOI 14 25193 -3
SAVA 8 8159 6
DXPE 10 29362 2
Average 10.3 25748 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.3 hedge funds with bullish positions and the average amount invested in these stocks was $26 million. That figure was $143 million in GNK’s case. SCVX Corp. (NYSE:SCVX) is the most popular stock in this table. On the other hand Cheetah Mobile Inc (NYSE:CMCM) is the least popular one with only 4 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 overall hedge fund sentiment score for GNK is 46.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on GNK as the stock returned 13.4% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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