Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Enphase Energy Inc (NASDAQ:ENPH).
Is Enphase Energy Inc (NASDAQ:ENPH) the right pick for your portfolio? The smart money is becoming hopeful. The number of bullish hedge fund bets improved by 1 recently. Our calculations also showed that enph isn’t among the 30 most popular stocks among hedge funds.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
Let’s take a peek at the new hedge fund action encompassing Enphase Energy Inc (NASDAQ:ENPH).
Hedge fund activity in Enphase Energy Inc (NASDAQ:ENPH)
At the end of the first quarter, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ENPH over the last 15 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
Among these funds, Park West Asset Management held the most valuable stake in Enphase Energy Inc (NASDAQ:ENPH), which was worth $55.8 million at the end of the first quarter. On the second spot was Electron Capital Partners which amassed $43.1 million worth of shares. Moreover, Greenvale Capital, Tenzing Global Investors, and Luminus Management were also bullish on Enphase Energy Inc (NASDAQ:ENPH), allocating a large percentage of their portfolios to this stock.
As industrywide interest jumped, key money managers have been driving this bullishness. Bridger Management, managed by Roberto Mignone, assembled the largest position in Enphase Energy Inc (NASDAQ:ENPH). Bridger Management had $6.7 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $4.5 million investment in the stock during the quarter. The following funds were also among the new ENPH investors: Jim Simons’s Renaissance Technologies, Philip Hempleman’s Ardsley Partners, and David Harding’s Winton Capital Management.
Let’s now take a look at hedge fund activity in other stocks similar to Enphase Energy Inc (NASDAQ:ENPH). We will take a look at Dicerna Pharmaceuticals Inc (NASDAQ:DRNA), The St. Joe Company (NYSE:JOE), TPI Composites, Inc. (NASDAQ:TPIC), and Celestica Inc. (NYSE:CLS). This group of stocks’ market values are closest to ENPH’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DRNA | 19 | 298639 | -1 |
| JOE | 13 | 484514 | 1 |
| TPIC | 19 | 137247 | 6 |
| CLS | 15 | 81881 | 1 |
| Average | 16.5 | 250570 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $251 million. That figure was $208 million in ENPH’s case. Dicerna Pharmaceuticals Inc (NASDAQ:DRNA) is the most popular stock in this table. On the other hand The St. Joe Company (NYSE:JOE) is the least popular one with only 13 bullish hedge fund positions. Enphase Energy Inc (NASDAQ:ENPH) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on ENPH as the stock returned 70.9% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
