It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 5.2% over the 12-month period ending October 30, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey (as of September 2014) generated a return of 9.5% over the same time span, with 63% of these stocks outperforming the benchmark. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Encore Wire Corporation (NASDAQ:WIRE).
Is Encore Wire Corporation (NASDAQ:WIRE) a great investment today? Prominent investors are in a pessimistic mood. The number of long hedge fund bets retreated by 2 recently. Encore Wire Corporation (NASDAQ:WIRE) was in 11 hedge funds’ portfolios at the end of September. There were 13 hedge funds in our database with Encore Wire Corporation (NASDAQ:WIRE) holdings at the end of the previous quarter. The stock market had a similar opinion of the stock, which lost 26.24% value during the first quarter. In order to find more about the hedge fund sentiment, we will discuss hedge funds that held positions in Encore Wire Corporation (NASDAQ:WIRE), at the end of the last quarter.
At the end of this article, we will also compare Encore Wire Corporation (NASDAQ:WIRE) to other stocks, including Enanta Pharmaceuticals Inc (NASDAQ:ENTA), Container Store Group Inc (NYSE:TCS), and Usa Compression Partners LP (NYSE:USAC) to get a better sense of its popularity.
Follow Encore Wire Corp (NASDAQ:WIRE)
Follow Encore Wire Corp (NASDAQ:WIRE)
In today’s marketplace, there are a multitude of indicators market participants put to use to analyze stocks. Two of the most under-the-radar indicators are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the top hedge fund managers can outpace the broader indices by a superb amount (see the details here).
With all of this in mind, let’s take a gander at the recent action surrounding Encore Wire Corporation (NASDAQ:WIRE).
What have hedge funds been doing with Encore Wire Corporation (NASDAQ:WIRE)?
Heading into Q4, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a decrease of 15% from one quarter earlier. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund and institutional investor database, Chuck Royce’s Royce & Associates has the largest position in Encore Wire Corporation (NASDAQ:WIRE), worth close to $30.3 million, comprising 0.2% of its total 13F portfolio. The second largest stake is held by D E Shaw, which holds a $2.6 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Remaining peers with similar optimism encompass John Overdeck and David Siegel’s Two Sigma Advisors, Mark Lee’s Forest Hill Capital, and Brian C. Freckmann’s Lyon Street Capital.
Since Encore Wire Corporation (NASDAQ:WIRE) has witnessed a bearish sentiment from the smart money, it’s easy to see that there exists a select few hedge funds who sold off their positions entirely last quarter. At the top of the heap, Martin Whitman’s Third Avenue Management cut the largest position of all the hedgies tracked by Insider Monkey, totaling about $1.4 million in call options., and Glenn Russell Dubin’s Highbridge Capital Management was right behind this move, as the fund cut about $1 million worth of shares. These transactions are important to note, as total hedge fund interest was cut by 2 funds last quarter.
Let’s also examine hedge fund activity in other stocks similar to Encore Wire Corporation (NASDAQ:WIRE). We will take a look at Enanta Pharmaceuticals Inc (NASDAQ:ENTA), Container Store Group Inc (NYSE:TCS), Usa Compression Partners LP (NYSE:USAC), and Global Indemnity plc (NASDAQ:GBLI). This group of stocks’ market valuations match Encore Wire Corporation (NASDAQ:WIRE)‘s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ENTA | 6 | 37302 | -4 |
| TCS | 8 | 65819 | 0 |
| USAC | 4 | 5641 | 0 |
| GBLI | 5 | 24023 | 1 |
As you can see, these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $33 million. That figure was $42 million in Encore Wire Corporation (NASDAQ:WIRE)‘s case. Container Store Group Inc (NYSE:TCS) is the most popular stock in this table. On the other hand, Usa Compression Partners LP (NYSE:USAC) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks, Encore Wire Corporation (NASDAQ:WIRE) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
