Hedge Funds Are Souring On Eni SpA (E)

In this article we will take a look at whether hedge funds think Eni SpA (NYSE:E) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Eni SpA (NYSE:E) investors should be aware of a decrease in enthusiasm from smart money lately. Our calculations also showed that E isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Matthew Hulsizer of PEAK6 Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s review the fresh hedge fund action regarding Eni SpA (NYSE:E).

What have hedge funds been doing with Eni SpA (NYSE:E)?

Heading into the second quarter of 2020, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the previous quarter. The graph below displays the number of hedge funds with bullish position in E over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Fisher Asset Management was the largest shareholder of Eni SpA (NYSE:E), with a stake worth $26.4 million reported as of the end of September. Trailing Fisher Asset Management was Arrowstreet Capital, which amassed a stake valued at $6.6 million. Citadel Investment Group, Millennium Management, and PEAK6 Capital Management 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 Fisher Asset Management allocated the biggest weight to Eni SpA (NYSE:E), around 0.03% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, earmarking 0.02 percent of its 13F equity portfolio to E.

Since Eni SpA (NYSE:E) has experienced falling interest from the smart money, logic holds that there is a sect of fund managers that elected to cut their entire stakes last quarter. It’s worth mentioning that Donald Sussman’s Paloma Partners dumped the largest stake of all the hedgies followed by Insider Monkey, comprising about $0.3 million in stock, and Claes Fornell’s CSat Investment Advisory was right behind this move, as the fund dumped about $0 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 1 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to Eni SpA (NYSE:E). These stocks are Exelon Corporation (NASDAQ:EXC), Koninklijke Philips NV (NYSE:PHG), Westpac Banking Corporation (NYSE:WBK), and Sprint Corporation (NYSE:S). All of these stocks’ market caps resemble E’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $685 million. That figure was $35 million in E’s case. Exelon Corporation (NASDAQ:EXC) is the most popular stock in this table. On the other hand Westpac Banking Corporation (NYSE:WBK) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Eni SpA (NYSE:E) is even less popular than WBK. Hedge funds dodged a bullet by taking a bearish stance towards E. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but managed to beat the market by 13.2 percentage points. Unfortunately E wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); E investors were disappointed as the stock returned -3.3% during the second quarter (through the end of May) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.

Disclosure: None. This article was originally published at Insider Monkey.