Do Hedge Funds Love Infrastructure and Energy Alternatives, Inc. (IEA)?

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on June 30th. We at Insider Monkey have made an extensive database of more than 873 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Infrastructure and Energy Alternatives, Inc. (NASDAQ:IEA) based on those filings.

Is Infrastructure and Energy Alternatives, Inc. (NASDAQ:IEA) a buy here? Hedge funds were taking a pessimistic view. The number of bullish hedge fund positions were cut by 3 in recent months. Infrastructure and Energy Alternatives, Inc. (NASDAQ:IEA) was in 10 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 13. Our calculations also showed that IEA isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 13 hedge funds in our database with IEA positions at the end of the first 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 S&P 500 ETFs by 79 percentage points since March 2017 (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.

Bart Baum of Ionic Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let’s take a look at the recent hedge fund action surrounding Infrastructure and Energy Alternatives, Inc. (NASDAQ:IEA).

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

At Q2’s end, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of -23% from one quarter earlier. By comparison, 7 hedge funds held shares or bullish call options in IEA a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Park West Asset Management, managed by Peter S. Park, holds the number one position in Infrastructure and Energy Alternatives, Inc. (NASDAQ:IEA). Park West Asset Management has a $20.6 million position in the stock, comprising 0.6% of its 13F portfolio. The second largest stake is held by Royce & Associates, managed by Chuck Royce, which holds a $11.3 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other peers that hold long positions contain Steve Cohen’s Point72 Asset Management, Bart Baum’s Ionic Capital Management and Dmitry Balyasny’s Balyasny Asset Management. In terms of the portfolio weights assigned to each position Ionic Capital Management allocated the biggest weight to Infrastructure and Energy Alternatives, Inc. (NASDAQ:IEA), around 0.65% of its 13F portfolio. Park West Asset Management is also relatively very bullish on the stock, designating 0.59 percent of its 13F equity portfolio to IEA.

Because Infrastructure and Energy Alternatives, Inc. (NASDAQ:IEA) has faced declining sentiment from the entirety of the hedge funds we track, we can see that there is a sect of hedge funds who sold off their positions entirely by the end of the second quarter. Intriguingly, Zilvinas Mecelis’s Covalis Capital dropped the biggest stake of the “upper crust” of funds tracked by Insider Monkey, worth about $29.8 million in stock. Phill Gross and Robert Atchinson’s fund, Adage Capital Management, also sold off its stock, about $11.7 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 3 funds by the end of the second quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Infrastructure and Energy Alternatives, Inc. (NASDAQ:IEA) but similarly valued. These stocks are Escalade, Inc. (NASDAQ:ESCA), CTO Realty Growth Inc (NYSE:CTO), Greenlight Capital Re, Ltd. (NASDAQ:GLRE), PLx Pharma Inc. (NASDAQ:PLXP), NL Industries, Inc. (NYSE:NL), NN, Inc. (NASDAQ:NNBR), and Kaleido BioSciences, Inc. (NASDAQ:KLDO). All of these stocks’ market caps resemble IEA’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.3 hedge funds with bullish positions and the average amount invested in these stocks was $28 million. That figure was $56 million in IEA’s case. CTO Realty Growth Inc (NYSE:CTO) is the most popular stock in this table. On the other hand NL Industries, Inc. (NYSE:NL) is the least popular one with only 2 bullish hedge fund positions. Infrastructure and Energy Alternatives, Inc. (NASDAQ:IEA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for IEA is 65.1. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 25.7% in 2021 through September 27th and beat the market again by 6.2 percentage points. Unfortunately IEA wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on IEA were disappointed as the stock returned -8.3% since the end of June (through 9/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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