Is GNW A Good Stock To Buy According To Hedge Funds?

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 817 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Genworth Financial Inc (NYSE:GNW) in this article.

Is GNW a good stock to buy? Genworth Financial Inc (NYSE:GNW) investors should be aware of an increase in enthusiasm from smart money of late. Genworth Financial Inc (NYSE:GNW) was in 38 hedge funds’ portfolios at the end of September. The all time high for this statistic is 36. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that GNW 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).

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.

Bill Miller

Bill Miller of Miller Value Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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 let’s check out the key hedge fund action surrounding Genworth Financial Inc (NYSE:GNW).

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

At the end of the third quarter, a total of 38 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GNW over the last 21 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

Among these funds, Miller Value Partners held the most valuable stake in Genworth Financial Inc (NYSE:GNW), which was worth $34.6 million at the end of the third quarter. On the second spot was Shah Capital Management which amassed $30.9 million worth of shares. Maso Capital, TIG Advisors, and Sonic Capital 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 Shah Capital Management allocated the biggest weight to Genworth Financial Inc (NYSE:GNW), around 16.23% of its 13F portfolio. Litespeed Management is also relatively very bullish on the stock, designating 15.26 percent of its 13F equity portfolio to GNW.

As one would reasonably expect, some big names have been driving this bullishness. Havens Advisors, managed by Nancy Havens-Hasty, initiated the largest position in Genworth Financial Inc (NYSE:GNW). Havens Advisors had $1.5 million invested in the company at the end of the quarter. David Nguyen and Nancy Oh’s One68 Global Capital also made a $1 million investment in the stock during the quarter. The other funds with brand new GNW positions are Kenneth Tropin’s Graham Capital Management, Frank Brosens’s Taconic Capital, and James Chen’s Ovata Capital Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Genworth Financial Inc (NYSE:GNW) but similarly valued. We will take a look at Flagstar Bancorp Inc (NYSE:FBC), TransAlta Corporation (NYSE:TAC), Atlantic Union Bankshares Corporation (NASDAQ:AUB), Repay Holdings Corporation (NASDAQ:RPAY), Dycom Industries, Inc. (NYSE:DY), Sonos, Inc. (NASDAQ:SONO), and O-I Glass, Inc. (NYSE:OI). This group of stocks’ market caps are closest to GNW’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FBC 25 157536 10
TAC 13 59596 1
AUB 9 34586 -3
RPAY 26 250330 8
DY 16 67971 0
SONO 32 336456 -3
OI 27 254546 2
Average 21.1 165860 2.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.1 hedge funds with bullish positions and the average amount invested in these stocks was $166 million. That figure was $249 million in GNW’s case. Sonos, Inc. (NASDAQ:SONO) is the most popular stock in this table. On the other hand Atlantic Union Bankshares Corporation (NASDAQ:AUB) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Genworth Financial Inc (NYSE:GNW) is more popular among hedge funds. Our overall hedge fund sentiment score for GNW is 87. 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 returned 33.3% in 2020 through December 18th but still managed to beat the market by 16.4 percentage points. Hedge funds were also right about betting on GNW as the stock returned 26.9% since the end of September (through 12/18) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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