Is EDN A Good Stock To Buy?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Empresa Distribuidora y Comercializadora Norte Sociedad Anonima (NYSE:EDN).

Empresa Distribuidora y Comercializadora Norte Sociedad Anonima (NYSE:EDN) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 3 hedge funds’ portfolios at the end of March. Our calculations also showed that EDN isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare EDN to other stocks including Investcorp Credit Management BDC, Inc. (NASDAQ:ICMB), QuickLogic Corporation (NASDAQ:QUIK), and Aware, Inc. (NASDAQ:AWRE) to get a better sense of its popularity.

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 monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Casey Whalen of Truvvo Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $26 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s take a gander at the new hedge fund action regarding Empresa Distribuidora y Comercializadora Norte Sociedad Anonima (NYSE:EDN).

Do Hedge Funds Think EDN Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in EDN over the last 23 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in Empresa Distribuidora y Comercializadora Norte Sociedad Anonima (NYSE:EDN), which was worth $0.2 million at the end of the fourth quarter. On the second spot was Millennium Management which amassed $0.1 million worth of shares. Truvvo Partners was also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Truvvo Partners allocated the biggest weight to Empresa Distribuidora y Comercializadora Norte Sociedad Anonima (NYSE:EDN), around 0.03% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, setting aside 0.0002 percent of its 13F equity portfolio to EDN.

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 check out hedge fund activity in other stocks similar to Empresa Distribuidora y Comercializadora Norte Sociedad Anonima (NYSE:EDN). We will take a look at Investcorp Credit Management BDC, Inc. (NASDAQ:ICMB), QuickLogic Corporation (NASDAQ:QUIK), Aware, Inc. (NASDAQ:AWRE), Delcath Systems, Inc. (NASDAQ:DCTH), Ekso Bionics Holdings, Inc. (NASDAQ:EKSO), Monopar Therapeutics Inc. (NASDAQ:MNPR), and PolarityTE, Inc. (NASDAQ:PTE). This group of stocks’ market values are similar to EDN’s market value.

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As you can see these stocks had an average of 4 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $0 million in EDN’s case. Delcath Systems, Inc. (NASDAQ:DCTH) is the most popular stock in this table. On the other hand Investcorp Credit Management BDC, Inc. (NASDAQ:ICMB) is the least popular one with only 1 bullish hedge fund positions. Empresa Distribuidora y Comercializadora Norte Sociedad Anonima (NYSE:EDN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for EDN is 30.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. A small number of hedge funds were also right about betting on EDN as the stock returned 39.7% since the end of the first quarter (through 6/11) and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.