Reputable billionaire investors such as Jim Simons, Cliff Asness and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Hedge fund interest in Bloom Energy Corporation (NYSE:BE) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare BE to other stocks including Iovance Biotherapeutics, Inc. (NASDAQ:IOVA), Electronics For Imaging, Inc. (NASDAQ:EFII), and OceanFirst Financial Corp. (NASDAQ:OCFC) to get a better sense of its popularity.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to take a gander at the fresh hedge fund action encompassing Bloom Energy Corporation (NYSE:BE).
What does the smart money think about Bloom Energy Corporation (NYSE:BE)?
Heading into the first quarter of 2019, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BE over the last 14 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
The largest stake in Bloom Energy Corporation (NYSE:BE) was held by ValueAct Capital, which reported holding $4.5 million worth of stock at the end of December. It was followed by Napier Park Global Capital with a $2.6 million position. Other investors bullish on the company included Hudson Bay Capital Management, Citadel Investment Group, and Marshall Wace LLP.
Because Bloom Energy Corporation (NYSE:BE) has experienced falling interest from the smart money, logic holds that there is a sect of funds that elected to cut their entire stakes in the third quarter. At the top of the heap, Jos Shaver’s Electron Capital Partners said goodbye to the largest stake of all the hedgies tracked by Insider Monkey, worth close to $14.2 million in stock, and Benjamin A. Smith’s Laurion Capital Management was right behind this move, as the fund dropped about $13.6 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Bloom Energy Corporation (NYSE:BE) but similarly valued. These stocks are Iovance Biotherapeutics, Inc. (NASDAQ:IOVA), Electronics For Imaging, Inc. (NASDAQ:EFII), OceanFirst Financial Corp. (NASDAQ:OCFC), and SemGroup Corp (NYSE:SEMG). This group of stocks’ market caps match BE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IOVA | 22 | 542031 | -5 |
| EFII | 12 | 137901 | -2 |
| OCFC | 12 | 57674 | -3 |
| SEMG | 12 | 34576 | 5 |
| Average | 14.5 | 193046 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $193 million. That figure was $10 million in BE’s case. Iovance Biotherapeutics, Inc. (NASDAQ:IOVA) is the most popular stock in this table. On the other hand Electronics For Imaging, Inc. (NASDAQ:EFII) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Bloom Energy Corporation (NYSE:BE) is even less popular than EFII. Hedge funds clearly dropped the ball on BE as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on BE as the stock returned 30.1% and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.