Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Enel Generacion Chile SA (ADR) (NYSE:EOCC) was in 11 hedge funds’ portfolios at the end of September. EOCC has seen an increase in activity from the world’s largest hedge funds recently. There were 11 hedge funds in our database with EOCC positions at the end of September. At the end of this article we will also compare EOCC to other stocks including Aqua America Inc (NYSE:WTR), Arris International PLC (NASDAQ:ARRS), and Senior Housing Properties Trust (NASDAQ:SNH) to get a better sense of its popularity.
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We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
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Keeping this in mind, let’s take a gander at the key action surrounding Enel Generacion Chile SA (ADR) (NYSE:EOCC).
What does the smart money think about Enel Generacion Chile SA (ADR) (NYSE:EOCC)?
At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a growth of 22% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in EOCC over the last 5 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Renaissance Technologies, one of the largest hedge funds in the world, has the most valuable position in Enel Generacion Chile SA (ADR) (NYSE:EOCC), worth close to $14.7 million, accounting for less than 0.1% of its total 13F portfolio. On Renaissance Technologies’s heels is Israel Englander’s Millennium Management, with a $8.4 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors that are bullish contain D. E. Shaw’s D E Shaw, Cliff Asness’ AQR Capital Management and John Overdeck and David Siegel’s Two Sigma Advisors. 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-microcap stocks.
As aggregate interest increased, specific money managers were breaking ground themselves. Ellington, led by Mike Vranos, established the biggest position in Enel Generacion Chile SA (ADR) (NYSE:EOCC). Ellington had $0.4 million invested in the company at the end of the quarter. Matthew Tewksbury’s Stevens Capital Management also initiated a $0.3 million position during the quarter.
Let’s go over hedge fund activity in other stocks similar to Enel Generacion Chile SA (ADR) (NYSE:EOCC). These stocks are Aqua America Inc (NYSE:WTR), Arris Group, Inc. (NASDAQ:ARRS), Senior Housing Properties Trust (NASDAQ:SNH), and Sun Communities Inc (NYSE:SUI). This group of stocks’ market values are similar to EOCC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WTR | 13 | 131324 | 3 |
| ARRS | 39 | 1254065 | 3 |
| SNH | 13 | 83107 | -3 |
| SUI | 17 | 236373 | -5 |
As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $426 million. That figure was $35 million in EOCC’s case. Arris Group, Inc. (NASDAQ:ARRS) is the most popular stock in this table. On the other hand Aqua America Inc (NYSE:WTR) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Enel Generacion Chile SA (ADR) (NYSE:EOCC) is even less popular than WTR. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None