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 Enerplus Corp (NYSE:ERF) based on that data.
Enerplus Corp (NYSE:ERF) shareholders have witnessed an increase in support from the world’s most elite money managers recently. ERF was in 20 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 17 hedge funds in our database with ERF positions at the end of the previous quarter. Our calculations also showed that ERF 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).
According to most shareholders, hedge funds are perceived as underperforming, outdated investment tools of years past. While there are over 8000 funds with their doors open at present, We hone in on the upper echelon of this group, approximately 850 funds. These hedge fund managers handle bulk of all hedge funds’ total asset base, and by watching their best investments, Insider Monkey has uncovered a number of investment strategies that have historically outstripped Mr. Market. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Noam Gottesman of GLG Partners
We leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve and other Central Banks are tripping over each other to print more money. As a result, we believe gold stocks will outperform fixed income ETFs in the long-term. So we are checking out investment opportunities like this one. 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. Now we’re going to take a look at the recent hedge fund action surrounding Enerplus Corp (NYSE:ERF).
What have hedge funds been doing with Enerplus Corp (NYSE:ERF)?
At the end of the fourth quarter, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards ERF over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
Among these funds, Encompass Capital Advisors held the most valuable stake in Enerplus Corp (NYSE:ERF), which was worth $96.9 million at the end of the third quarter. On the second spot was Cardinal Capital which amassed $24.8 million worth of shares. GLG Partners, Two Sigma Advisors, and Citadel Investment Group were 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 Encompass Capital Advisors allocated the biggest weight to Enerplus Corp (NYSE:ERF), around 6.17% of its 13F portfolio. Cardinal Capital is also relatively very bullish on the stock, dishing out 0.76 percent of its 13F equity portfolio to ERF.
As one would reasonably expect, some big names have jumped into Enerplus Corp (NYSE:ERF) headfirst. Centenus Global Management, managed by Sara Nainzadeh, assembled the largest position in Enerplus Corp (NYSE:ERF). Centenus Global Management had $2.8 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $0.4 million position during the quarter. The other funds with new positions in the stock are Israel Englander’s Millennium Management, Andrew Weiss’s Weiss Asset Management, and Gregory Fraser, Rudolph Kluiber, and Timothy Krochuk’s GRT Capital Partners.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Enerplus Corp (NYSE:ERF) but similarly valued. We will take a look at InVitae Corporation (NYSE:NVTA), Rent-A-Center Inc (NASDAQ:RCII), AAR Corp. (NYSE:AIR), and Moelis & Company (NYSE:MC). This group of stocks’ market valuations resemble ERF’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NVTA | 13 | 277519 | 0 |
| RCII | 25 | 435978 | -4 |
| AIR | 23 | 123873 | 3 |
| MC | 13 | 82176 | -5 |
| Average | 18.5 | 229887 | -1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $230 million. That figure was $169 million in ERF’s case. Rent-A-Center Inc (NASDAQ:RCII) is the most popular stock in this table. On the other hand InVitae Corporation (NYSE:NVTA) is the least popular one with only 13 bullish hedge fund positions. Enerplus Corp (NYSE:ERF) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately ERF wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ERF were disappointed as the stock returned -73.5% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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.
