The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Energy Focus Inc (NASDAQ:EFOI) based on those filings.
Is Energy Focus Inc (NASDAQ:EFOI) the right investment to pursue these days? Money managers are buying. The number of bullish hedge fund bets went up by 2 in recent months. Our calculations also showed that EFOI 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 44 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.
Ken Griffin of Citadel Investment Group
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s view the new hedge fund action surrounding Energy Focus Inc (NASDAQ:EFOI).
How are hedge funds trading Energy Focus Inc (NASDAQ:EFOI)?
At Q1’s end, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 200% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in EFOI over the last 18 quarters. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Sabby Capital, managed by Hal Mintz, holds the number one position in Energy Focus Inc (NASDAQ:EFOI). Sabby Capital has a $0.1 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is Citadel Investment Group, managed by Ken Griffin, which holds a $0 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. In terms of the portfolio weights assigned to each position Sabby Capital allocated the biggest weight to Energy Focus Inc (NASDAQ:EFOI), around 0.04% of its 13F portfolio. Cavalry Asset Management is also relatively very bullish on the stock, designating 0.0008 percent of its 13F equity portfolio to EFOI.
As industrywide interest jumped, specific money managers were leading the bulls’ herd. Sabby Capital, managed by Hal Mintz, initiated the most valuable position in Energy Focus Inc (NASDAQ:EFOI). Sabby Capital had $0.1 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0 million investment in the stock during the quarter. The only other fund with a brand new EFOI position is John Hurley’s Cavalry Asset Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Energy Focus Inc (NASDAQ:EFOI) but similarly valued. We will take a look at XpresSpa Group, Inc. (NASDAQ:XSPA), ReWalk Robotics Ltd. (NASDAQ:RWLK), Synthetic Biologics Inc (NYSE:SYN), and Independence Contract Drilling Inc (NYSE:ICD). This group of stocks’ market valuations match EFOI’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| XSPA | 2 | 70 | 1 |
| RWLK | 3 | 293 | 2 |
| SYN | 2 | 246 | 0 |
| ICD | 7 | 2387 | -3 |
| Average | 3.5 | 749 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.5 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $0 million in EFOI’s case. Independence Contract Drilling Inc (NYSE:ICD) is the most popular stock in this table. On the other hand XpresSpa Group, Inc. (NASDAQ:XSPA) is the least popular one with only 2 bullish hedge fund positions. Energy Focus Inc (NASDAQ:EFOI) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd and still beat the market by 15.6 percentage points. A small number of hedge funds were also right about betting on EFOI as the stock returned 115.2% during the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
