The market has been volatile in the last few months as the Federal Reserve finalized its rate cuts and uncertainty looms over trade negotiations with China. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points over the last 12 months. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure since summer months, though some funds increased their exposure dramatically at the end of Q3 and the beginning of Q4. In this article, we analyze what the smart money thinks of Just Energy Group, Inc. (NYSE:JE) and find out how it is affected by hedge funds’ moves.
Just Energy Group, Inc. (NYSE:JE) investors should pay attention to a decrease in enthusiasm from smart money recently. Our calculations also showed that JE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Philip Hempleman of Ardsley Partners
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. 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 also rely on the best performing hedge funds‘ buy/sell signals. Let’s check out the recent hedge fund action surrounding Just Energy Group, Inc. (NYSE:JE).
How have hedgies been trading Just Energy Group, Inc. (NYSE:JE)?
At Q3’s end, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -38% from the previous quarter. The graph below displays the number of hedge funds with bullish position in JE 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.
Among these funds, Ardsley Partners held the most valuable stake in Just Energy Group, Inc. (NYSE:JE), which was worth $20.7 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $4.1 million worth of shares. Blackstart Capital, Miller Value Partners, and Two Sigma Advisors 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 Ardsley Partners allocated the biggest weight to Just Energy Group, Inc. (NYSE:JE), around 4.64% of its 13F portfolio. Blackstart Capital is also relatively very bullish on the stock, dishing out 1.39 percent of its 13F equity portfolio to JE.
Judging by the fact that Just Energy Group, Inc. (NYSE:JE) has experienced a decline in interest from the smart money, logic holds that there lies a certain “tier” of hedgies that slashed their entire stakes last quarter. Interestingly, Noam Gottesman’s GLG Partners sold off the largest investment of the “upper crust” of funds tracked by Insider Monkey, comprising about $2.6 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also said goodbye to its stock, about $2.4 million worth. These transactions are interesting, as total hedge fund interest dropped by 5 funds last quarter.
Let’s check out hedge fund activity in other stocks similar to Just Energy Group, Inc. (NYSE:JE). We will take a look at Vista Outdoor Inc (NYSE:VSTO), EZCORP Inc (NASDAQ:EZPW), X Financial (NYSE:XYF), and West Bancorporation, Inc. (NASDAQ:WTBA). All of these stocks’ market caps resemble JE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VSTO | 14 | 68721 | -2 |
| EZPW | 18 | 81131 | -3 |
| XYF | 2 | 1574 | -1 |
| WTBA | 4 | 9449 | 0 |
| Average | 9.5 | 40219 | -1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $40 million. That figure was $32 million in JE’s case. EZCORP Inc (NASDAQ:EZPW) is the most popular stock in this table. On the other hand X Financial (NYSE:XYF) is the least popular one with only 2 bullish hedge fund positions. Just Energy Group, Inc. (NYSE:JE) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on JE as the stock returned 14.8% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
