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.
Brookfield Renewable Partners L.P. (NYSE:BEP) has experienced an increase in activity from the world’s largest hedge funds of late. BEP was in 4 hedge funds’ portfolios at the end of June. There were 3 hedge funds in our database with BEP positions at the end of the previous quarter. Our calculations also showed that BEP isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 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.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to analyze the recent hedge fund action surrounding Brookfield Renewable Partners L.P. (NYSE:BEP).
What have hedge funds been doing with Brookfield Renewable Partners L.P. (NYSE:BEP)?
At Q2’s end, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the first quarter of 2019. On the other hand, there were a total of 2 hedge funds with a bullish position in BEP a year ago. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Ecofin Ltd, managed by Bernard Lambilliotte, holds the most valuable position in Brookfield Renewable Partners L.P. (NYSE:BEP). Ecofin Ltd has a $5 million position in the stock, comprising 2.5% of its 13F portfolio. Coming in second is Renaissance Technologies which holds a $1.1 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other members of the smart money that hold long positions encompass George Zweig, Shane Haas and Ravi Chander’s Signition LP, and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Now, some big names have been driving this bullishness. Ecofin Ltd, managed by Bernard Lambilliotte, created the biggest position in Brookfield Renewable Partners L.P. (NYSE:BEP). Ecofin Ltd had $5 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $0.7 million position during the quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Brookfield Renewable Partners L.P. (NYSE:BEP) but similarly valued. We will take a look at Encompass Health Corporation (NYSE:EHC), Sabre Corporation (NASDAQ:SABR), Owens Corning (NYSE:OC), and Dr. Reddy’s Laboratories Limited (NYSE:RDY). This group of stocks’ market valuations match BEP’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EHC | 23 | 507276 | -1 |
| SABR | 12 | 140283 | -9 |
| OC | 34 | 1483283 | 7 |
| RDY | 11 | 80625 | 0 |
| Average | 20 | 552867 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $553 million. That figure was $8 million in BEP’s case. Owens Corning (NYSE:OC) is the most popular stock in this table. On the other hand Dr. Reddy’s Laboratories Limited (NYSE:RDY) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Brookfield Renewable Partners L.P. (NYSE:BEP) is even less popular than RDY. Hedge funds clearly dropped the ball on BEP as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on BEP as the stock returned 19.1% during the third quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.