In this article we will check out the progression of hedge fund sentiment towards Broadwind Energy Inc. (NASDAQ:BWEN) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Broadwind Energy Inc. (NASDAQ:BWEN) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 3 hedge funds’ portfolios at the end of March. At the end of this article we will also compare BWEN to other stocks including Gridsum Holding Inc. (NASDAQ:GSUM), Tecogen Inc. (NASDAQ:TGEN), and Superior Energy Services, Inc. (NYSE:SPN) to get a better sense of its popularity.
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.
Gifford Combs of Dalton Investments
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. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital’s Michael Castor expects to double. 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 we’re going to take a peek at the key hedge fund action encompassing Broadwind Energy Inc. (NASDAQ:BWEN).
Hedge fund activity in Broadwind Energy Inc. (NASDAQ:BWEN)
At the end of the first quarter, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards BWEN over the last 18 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the number one position in Broadwind Energy Inc. (NASDAQ:BWEN), worth close to $1.1 million, accounting for less than 0.1%% of its total 13F portfolio. The second largest stake is held by Jeffrey Gendell of Tontine Asset Management, with a $0.2 million position; the fund has 0.1% of its 13F portfolio invested in the stock. In terms of the portfolio weights assigned to each position Tontine Asset Management allocated the biggest weight to Broadwind Energy Inc. (NASDAQ:BWEN), around 0.05% of its 13F portfolio. Dalton Investments is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to BWEN.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Broadwind Energy Inc. (NASDAQ:BWEN) but similarly valued. We will take a look at Gridsum Holding Inc. (NASDAQ:GSUM), Tecogen Inc. (NASDAQ:TGEN), Superior Energy Services, Inc. (NYSE:SPN), and Big 5 Sporting Goods Corporation (NASDAQ:BGFV). This group of stocks’ market valuations resemble BWEN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GSUM | 5 | 4309 | 0 |
| TGEN | 1 | 43 | 0 |
| SPN | 8 | 5891 | -2 |
| BGFV | 12 | 4202 | 3 |
| Average | 6.5 | 3611 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $1 million in BWEN’s case. Big 5 Sporting Goods Corporation (NASDAQ:BGFV) is the most popular stock in this table. On the other hand Tecogen Inc. (NASDAQ:TGEN) is the least popular one with only 1 bullish hedge fund positions. Broadwind Energy Inc. (NASDAQ:BWEN) 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 BWEN as the stock returned 48.6% during the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
