Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 5.2% in the 12 months ending October 30, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of September 2014) generated a return of 9.5% during the same 12-month period, with 63% of these stock picks outperformed the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 16-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Broadwind Energy Inc. (NASDAQ:BWEN).
Is Broadwind Energy Inc. (NASDAQ:BWEN) going to take off soon? Money managers are in a pessimistic mood. The number of long hedge fund bets fell by 2 recently. At the end of this article we will also compare BWEN to other stocks including Resolute Energy Corp (NYSE:REN), China Techfaith Wireless Comm. Tech. Ltd (NASDAQ:CNTF), and Gevo, Inc. (NASDAQ:GEVO) to get a better sense of its popularity.
Follow Broadwind Inc. (NASDAQ:BWEN)
Follow Broadwind Inc. (NASDAQ:BWEN)
To the average investor there are tons of gauges investors put to use to size up publicly traded companies. Some of the less utilized gauges are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the top picks of the elite money managers can outperform their index-focused peers by a healthy amount (see the details here).
Now, let’s check out the fresh action regarding Broadwind Energy Inc. (NASDAQ:BWEN).
How have hedgies been trading Broadwind Energy Inc. (NASDAQ:BWEN)?
Heading into Q4, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from the second quarter. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
Among the shareholders with largest stakes in BWEN, Jeffrey Gendell’s Tontine Asset Management held the largest stake, valued at $2.9 million amassing 0.6% of its 13F portfolio. Renaissance Technologies and Paul Solit’s Potomac Asset Management also reported positions valued at around $500,000 and $100,000, respectively.
Because Broadwind Energy Inc. (NASDAQ:BWEN) has experienced a bearish sentiment from the smart money, we can see that there is a two hedgies who sold off their full holdings last quarter. At the top of the heap, Mark Coe’s Coe Capital Management dropped the largest investment of all the hedgies monitored by Insider Monkey, valued at an estimated $0.8 million in stock, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital was right behind this move, as the fund cut about $0.1 million worth of shares.
Let’s check out 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 Resolute Energy Corp (NYSE:REN), China Techfaith Wireless Comm. Tech. Ltd (NASDAQ:CNTF), Gevo, Inc. (NASDAQ:GEVO), and AEterna Zentaris Inc. (USA) (NASDAQ:AEZS). This group of stocks’ market caps are closest to BWEN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| REN | 9 | 11327 | -6 |
| CNTF | 4 | 616 | 0 |
| GEVO | 7 | 10893 | 1 |
| AEZS | 4 | 1173 | 2 |
As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $6 million, slightly higher than the $4 million in BWEN’s case. Resolute Energy Corp (NYSE:REN) is the most popular stock in this table. On the other hand China Techfaith Wireless Comm. Tech. Ltd (NASDAQ:CNTF) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Broadwind Energy Inc. (NASDAQ:BWEN) registers the same number of hedge funds as the least popular stock, CNTF. Considering that hedge funds aren’t fond of this stock in relation to the majority of the other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock.