Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before last year’s Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Enphase Energy Inc (NASDAQ:ENPH) changed recently.
Enphase Energy Inc (NASDAQ:ENPH) investors should pay attention to an increase in enthusiasm from smart money of late. Our calculations also showed that ENPH isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
If you’d ask most investors, hedge funds are assumed to be underperforming, outdated financial tools of years past. While there are greater than 8000 funds with their doors open at present, Our researchers hone in on the moguls of this club, about 750 funds. It is estimated that this group of investors handle most of the hedge fund industry’s total asset base, and by observing their inimitable picks, Insider Monkey has figured out many investment strategies that have historically outperformed the broader indices. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Israel Englander of Millennium Management
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 view the recent hedge fund action regarding Enphase Energy Inc (NASDAQ:ENPH).
What have hedge funds been doing with Enphase Energy Inc (NASDAQ:ENPH)?
At the end of the third quarter, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of 60% from one quarter earlier. By comparison, 19 hedge funds held shares or bullish call options in ENPH a year ago. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
More specifically, Park West Asset Management was the largest shareholder of Enphase Energy Inc (NASDAQ:ENPH), with a stake worth $62.2 million reported as of the end of September. Trailing Park West Asset Management was Greenvale Capital, which amassed a stake valued at $38.9 million. Millennium Management, Luminus Management, and Electron Capital Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Greenvale Capital allocated the biggest weight to Enphase Energy Inc (NASDAQ:ENPH), around 11.64% of its 13F portfolio. Electron Capital Partners is also relatively very bullish on the stock, setting aside 4.02 percent of its 13F equity portfolio to ENPH.
Now, key hedge funds were leading the bulls’ herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the most valuable position in Enphase Energy Inc (NASDAQ:ENPH). Arrowstreet Capital had $16.2 million invested in the company at the end of the quarter. Joel Greenblatt’s Gotham Asset Management also initiated a $2.6 million position during the quarter. The other funds with new positions in the stock are Donald Sussman’s Paloma Partners, Richard Driehaus’s Driehaus Capital, and Philip Hempleman’s Ardsley Partners.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Enphase Energy Inc (NASDAQ:ENPH) but similarly valued. We will take a look at Rattler Midstream LP (NASDAQ:RTLR), Manchester United PLC (NYSE:MANU), Methanex Corporation (NASDAQ:MEOH), and Emergent Biosolutions Inc (NYSE:EBS). This group of stocks’ market values are similar to ENPH’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RTLR | 11 | 163347 | -9 |
| MANU | 11 | 32460 | 1 |
| MEOH | 16 | 186485 | -1 |
| EBS | 18 | 157940 | 5 |
| Average | 14 | 135058 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $135 million. That figure was $290 million in ENPH’s case. Emergent Biosolutions Inc (NYSE:EBS) is the most popular stock in this table. On the other hand Rattler Midstream LP (NASDAQ:RTLR) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Enphase Energy Inc (NASDAQ:ENPH) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on ENPH as the stock returned 466.8% so far in 2019 (through 12/23) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
