There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other successful funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Enzymotec Ltd (NASDAQ:ENZY).
Enzymotec Ltd (NASDAQ:ENZY) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 6 hedge funds’ portfolios at the end of the third quarter of 2016, same as at the halfway point of the year. At the end of this article we will also compare ENZY to other stocks including GigOptix Inc (NYSEAMEX:GIG), CAI International Inc (NYSE:CAI), and A. H. Belo Corporation (NYSE:AHC) to get a better sense of its popularity.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
kurhan / shutterstock.com
Hedge fund activity in Enzymotec Ltd (NASDAQ:ENZY)
Heading into the fourth quarter of 2016, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, unchanged from one quarter earlier. By comparison, 6 hedge funds also held shares or bullish call options in ENZY heading into this year, with hedge fund positions being flat for the entire year. So, let’s check out 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, John Paulson’s Paulson & Co has the most valuable position in Enzymotec Ltd (NASDAQ:ENZY), worth close to $29.4 million. The second most bullish fund manager is Tiger Management, led by Julian Robertson, which holds a $4.7 million position; 1.1% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors with similar optimism encompass Renaissance Technologies, one of the largest hedge funds in the world, Israel Englander’s Millennium Management, and Benjamin A. Smith’s Laurion Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds, which is based on the performance of their 13F long positions in non-micro-cap stocks.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions either. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Enzymotec Ltd (NASDAQ:ENZY) but similarly valued. We will take a look at GigOptix Inc (NYSEAMEX:GIG), CAI International Inc (NYSE:CAI), A. H. Belo Corporation (NYSE:AHC), and Willis Lease Finance Corporation (NASDAQ:WLFC). All of these stocks’ market caps are similar to ENZY’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GIG | 6 | 11602 | -5 |
| CAI | 5 | 12967 | -4 |
| AHC | 4 | 5115 | 1 |
| WLFC | 2 | 16122 | 0 |
As you can see these stocks had an average of 4 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $38 million in ENZY’s case. GigOptix Inc (NYSEAMEX:GIG) is the most popular stock in this table. On the other hand Willis Lease Finance Corporation (NASDAQ:WLFC) is the least popular one with only 2 bullish hedge fund positions. Enzymotec Ltd (NASDAQ:ENZY) is tied as the most popular stock in this group. This is a positive signal, as we’d rather spend our time researching stocks that hedge funds are piling on. In this regard ENZY might be a good candidate to consider taking a long position in.
Disclosure: None
