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 Energous Corporation (NASDAQ:WATT)? The smart money sentiment can provide an answer to this question.
Energous Corporation (NASDAQ:WATT) was in 5 hedge funds’ portfolios at the end of the third quarter of 2019. WATT investors should be aware of an increase in enthusiasm from smart money in recent months. There were 3 hedge funds in our database with WATT holdings at the end of the previous quarter. Our calculations also showed that WATT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Matthew Hulsizer of PEAK6 Capital
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind let’s take a peek at the new hedge fund action regarding Energous Corporation (NASDAQ:WATT).
How have hedgies been trading Energous Corporation (NASDAQ:WATT)?
Heading into the fourth quarter of 2019, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 67% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards WATT over the last 17 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.
The largest stake in Energous Corporation (NASDAQ:WATT) was held by Raging Capital Management, which reported holding $1.4 million worth of stock at the end of September. It was followed by PEAK6 Capital Management with a $0.3 million position. Other investors bullish on the company included Citadel Investment Group, Sculptor Capital, and AQR Capital Management. In terms of the portfolio weights assigned to each position Raging Capital Management allocated the biggest weight to Energous Corporation (NASDAQ:WATT), around 0.23% of its 13F portfolio. PEAK6 Capital Management is also relatively very bullish on the stock, setting aside 0.0018 percent of its 13F equity portfolio to WATT.
Now, key money managers were leading the bulls’ herd. AQR Capital Management, managed by Cliff Asness, created the biggest position in Energous Corporation (NASDAQ:WATT). AQR Capital Management had $0.1 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $0 million position during the quarter.
Let’s now review hedge fund activity in other stocks similar to Energous Corporation (NASDAQ:WATT). These stocks are Matinas Biopharma Holdings, Inc. (NYSE:MTNB), Immunic, Inc. (NASDAQ:IMUX), Ranger Energy Services, Inc. (NYSE:RNGR), and Correvio Pharma Corp. (NASDAQ:CORV). This group of stocks’ market values resemble WATT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MTNB | 5 | 6851 | 0 |
| IMUX | 2 | 540 | 0 |
| RNGR | 3 | 4010 | 0 |
| CORV | 9 | 21674 | 0 |
| Average | 4.75 | 8269 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.75 hedge funds with bullish positions and the average amount invested in these stocks was $8 million. That figure was $2 million in WATT’s case. Correvio Pharma Corp. (NASDAQ:CORV) is the most popular stock in this table. On the other hand Immunic, Inc. (NASDAQ:IMUX) is the least popular one with only 2 bullish hedge fund positions. Energous Corporation (NASDAQ:WATT) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately WATT wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on WATT were disappointed as the stock returned -36.7% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
