Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors’ favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the 12-month period ending October 30. The stats were even worse in recent years when most of the advances in the market were due to large gains by FAANG stocks. However, one bright side for individual investors was the strong performance of hedge funds’ top consensus picks. This year hedge funds’ top 30 stock picks outperformed the S&P 500 Index by 4 percentage points through the middle of November. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.
Enbridge Inc (NYSE:ENB) investors should be aware of an increase in hedge fund sentiment in recent months. ENB was in 21 hedge funds’ portfolios at the end of September. There were 16 hedge funds in our database with ENB holdings at the end of the previous quarter. Our calculations also showed that ENB isn’t among the 30 most popular stocks among hedge funds.
At the moment there are many signals shareholders have at their disposal to analyze publicly traded companies. Two of the most useful signals are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the best money managers can outclass the S&P 500 by a healthy margin (see the details here).
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Enbridge Inc (NYSE:ENB) but similarly valued. These stocks are Ecopetrol S.A. (NYSE:EC), Northrop Grumman Corporation (NYSE:NOC), Simon Property Group, Inc (NYSE:SPG), and Lloyds Banking Group PLC (NYSE:LYG). All of these stocks’ market caps are closest to ENB’s market cap.
More specifically, Magnetar Capital was the largest shareholder of Enbridge Inc (NYSE:ENB), with a stake worth $82.1 million reported as of the end of September. Trailing Magnetar Capital was Citadel Investment Group, which amassed a stake valued at $43.2 million. Renaissance Technologies, Millennium Management, and SIR Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
As aggregate interest increased, specific money managers have been driving this bullishness. Renaissance Technologies, managed by Jim Simons, established the biggest position in Enbridge Inc (NYSE:ENB). Renaissance Technologies had $30.3 million invested in the company at the end of the quarter. Michael Platt and William Reeves’s BlueCrest Capital Mgmt. also initiated a $2.1 million position during the quarter. The following funds were also among the new ENB investors: Paul Marshall and Ian Wace’s Marshall Wace LLP, Matthew Tewksbury’s Stevens Capital Management, and David Costen Haley’s HBK Investments.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Enbridge Inc (NYSE:ENB) but similarly valued. These stocks are Ecopetrol S.A. (NYSE:EC), Northrop Grumman Corporation (NYSE:NOC), Simon Property Group, Inc (NYSE:SPG), and Lloyds Banking Group PLC (NYSE:LYG). This group of stocks’ market values match ENB’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EC | 13 | 308393 | 2 |
| NOC | 33 | 1286673 | -8 |
| SPG | 25 | 812090 | 5 |
| LYG | 5 | 285815 | -1 |
| Average | 19 | 673243 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $673 million. That figure was $185 million in ENB’s case. Northrop Grumman Corporation (NYSE:NOC) is the most popular stock in this table. On the other hand Lloyds Banking Group PLC (NYSE:LYG) is the least popular one with only 5 bullish hedge fund positions. Enbridge Inc (NYSE:ENB) 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. In this regard NOC might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
