2018’s fourth quarter was a rough one for investors and many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 41.3% in 2019 and outperformed the S&P 500 ETF by more than 10 percentage points. In this article we will study how hedge fund sentiment towards EnCana Corporation (NYSE:ECA) changed during the third quarter and how the stock performed in comparison to hedge fund consensus stocks.
Is EnCana Corporation (NYSE:ECA) a buy right now? Hedge funds are in a bearish mood. The number of bullish hedge fund positions dropped by 7 recently. Our calculations also showed that ECA 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). ECA was in 25 hedge funds’ portfolios at the end of September. There were 32 hedge funds in our database with ECA holdings at the end of the previous quarter.
In the 21st century investor’s toolkit there are several methods market participants put to use to size up their holdings. A pair of the most useful methods are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the elite hedge fund managers can outperform their index-focused peers by a very impressive amount (see the details here).
Andy Redleaf of Whitebox Advisors
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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 is still extremely cheap despite already gaining 20 percent. Now we’re going to take a look at the new hedge fund action surrounding EnCana Corporation (NYSE:ECA).
What have hedge funds been doing with EnCana Corporation (NYSE:ECA)?
Heading into the fourth quarter of 2019, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -22% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ECA over the last 17 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of EnCana Corporation (NYSE:ECA), with a stake worth $81.7 million reported as of the end of September. Trailing Renaissance Technologies was Two Sigma Advisors, which amassed a stake valued at $55.7 million. Whitebox Advisors, Adage Capital Management, and Marshall Wace 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 Southport Management allocated the biggest weight to EnCana Corporation (NYSE:ECA), around 3.88% of its 13F portfolio. Whitebox Advisors is also relatively very bullish on the stock, earmarking 1.27 percent of its 13F equity portfolio to ECA.
Due to the fact that EnCana Corporation (NYSE:ECA) has experienced falling interest from the smart money, we can see that there was a specific group of hedgies who sold off their full holdings heading into Q4. It’s worth mentioning that Vince Maddi and Shawn Brennan’s SIR Capital Management dropped the biggest investment of the “upper crust” of funds watched by Insider Monkey, valued at an estimated $22.4 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund sold off about $17.8 million worth. These transactions are important to note, as total hedge fund interest fell by 7 funds heading into Q4.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as EnCana Corporation (NYSE:ECA) but similarly valued. These stocks are EPR Properties (NYSE:EPR), Vipshop Holdings Limited (NYSE:VIPS), RealPage, Inc. (NASDAQ:RP), and Casey’s General Stores, Inc. (NASDAQ:CASY). This group of stocks’ market caps resemble ECA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EPR | 18 | 201024 | -2 |
| VIPS | 22 | 244059 | 5 |
| RP | 31 | 569288 | -2 |
| CASY | 16 | 103612 | -2 |
| Average | 21.75 | 279496 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $279 million. That figure was $262 million in ECA’s case. RealPage, Inc. (NASDAQ:RP) is the most popular stock in this table. On the other hand Casey’s General Stores, Inc. (NASDAQ:CASY) is the least popular one with only 16 bullish hedge fund positions. EnCana Corporation (NYSE:ECA) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately ECA wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ECA were disappointed as the stock returned -17.6% in 2019 and trailed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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.
