We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We at Insider Monkey have gone over 835 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article, we look at what those funds think of Enphase Energy Inc (NASDAQ:ENPH) based on that data.
Is Enphase Energy Inc (NASDAQ:ENPH) a healthy stock for your portfolio? The best stock pickers are in a bullish mood. The number of long hedge fund positions improved by 6 lately. Our calculations also showed that ENPH isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. 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 Enphase Energy Inc (NASDAQ:ENPH).
How have hedgies been trading Enphase Energy Inc (NASDAQ:ENPH)?
At the end of the fourth quarter, a total of 39 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 18% from the previous quarter. By comparison, 18 hedge funds held shares or bullish call options in ENPH a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Enphase Energy Inc (NASDAQ:ENPH) was held by Park West Asset Management, which reported holding $101.7 million worth of stock at the end of September. It was followed by Electron Capital Partners with a $57.3 million position. Other investors bullish on the company included Renaissance Technologies, Greenvale Capital, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Greenvale Capital allocated the biggest weight to Enphase Energy Inc (NASDAQ:ENPH), around 11.44% of its 13F portfolio. Electron Capital Partners is also relatively very bullish on the stock, earmarking 6.85 percent of its 13F equity portfolio to ENPH.
As aggregate interest increased, key hedge funds were breaking ground themselves. Stamina Capital Management, managed by Christopher Weldon, assembled the biggest position in Enphase Energy Inc (NASDAQ:ENPH). Stamina Capital Management had $9.9 million invested in the company at the end of the quarter. Daniel S. Och’s OZ Management also made a $5.2 million investment in the stock during the quarter. The following funds were also among the new ENPH investors: Till Bechtolsheimer’s Arosa Capital Management, Louis Bacon’s Moore Global Investments, and Chet Kapoor’s Tenzing Global Investors.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Enphase Energy Inc (NASDAQ:ENPH) but similarly valued. We will take a look at American States Water Co (NYSE:AWR), Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF), Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH), and Kennedy-Wilson Holdings Inc (NYSE:KW). This group of stocks’ market valuations are closest to ENPH’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AWR | 21 | 55302 | 4 |
| KOF | 10 | 493100 | -3 |
| DCPH | 28 | 699426 | 2 |
| KW | 17 | 508765 | -2 |
| Average | 19 | 439148 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $439 million. That figure was $443 million in ENPH’s case. Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH) is the most popular stock in this table. On the other hand Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Enphase Energy Inc (NASDAQ:ENPH) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but still managed to beat the market by 5.5 percentage points. Hedge funds were also right about betting on ENPH as the stock returned 40.9% so far in Q1 (through March 25th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
