The successful funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at EnLink Midstream LLC (NYSE:ENLC) from the perspective of those successful funds.
EnLink Midstream LLC (NYSE:ENLC) investors should be aware of an increase in support from the world’s most successful money managers lately. ENLC was in 8 hedge funds’ portfolios at the end of the third quarter of 2016. There were 5 hedge funds in our database with ENLC positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Univar Inc (NYSE:UNVR), EnerSys (NYSE:ENS), and Paycom Software Inc (NYSE:PAYC) to gather more data points.
Follow Enlink Midstream Llc (NYSE:ENLC)
Follow Enlink Midstream Llc (NYSE:ENLC)
We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
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Keeping this in mind, we’re going to view the recent action surrounding EnLink Midstream LLC (NYSE:ENLC).
How have hedgies been trading EnLink Midstream LLC (NYSE:ENLC)?
At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 60% from the second quarter of 2016. By comparison, 4 hedge funds held shares or bullish call options in ENLC heading into this year. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Israel Englander’s Millennium Management has the largest position in EnLink Midstream LLC (NYSE:ENLC), worth close to $9.6 million, accounting for less than 0.1%% of its total 13F portfolio. On Millennium Management’s heels is Ken Griffin of Citadel Investment Group, with a $4.6 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism encompass one of the biggest hedge funds in the world, D E Shaw, Jim Simons’s Renaissance Technologies and James Dondero’s Highland Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. Renaissance Technologies, led by Jim Simons, established the largest position in EnLink Midstream LLC (NYSE:ENLC). Renaissance Technologies had $2.5 million invested in the company at the end of the quarter. Richard Driehaus’s Driehaus Capital also initiated a $1.1 million position during the quarter. The only other fund with a new position in the stock is Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as EnLink Midstream LLC (NYSE:ENLC) but similarly valued. These stocks are Univar Inc (NYSE:UNVR), EnerSys (NYSE:ENS), Paycom Software Inc (NYSE:PAYC), and Chimera Investment Corporation (NYSE:CIM). All of these stocks’ market caps resemble ENLC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UNVR | 24 | 444259 | 7 |
| ENS | 21 | 58250 | -1 |
| PAYC | 18 | 134789 | -1 |
| CIM | 11 | 106391 | -2 |
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 $186 million. That figure was $24 million in ENLC’s case. Univar Inc (NYSE:UNVR) is the most popular stock in this table. On the other hand Chimera Investment Corporation (NYSE:CIM) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks EnLink Midstream LLC (NYSE:ENLC) is even less popular than CIM. Considering that hedge funds aren’t fond of this stock in relation to 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. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
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