We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Enviva Partners, LP (NYSE:EVA).
Is Enviva Partners, LP (NYSE:EVA) an attractive investment today? Money managers are selling. The number of long hedge fund bets fell by 3 in recent months. Our calculations also showed that EVA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). EVA was in 4 hedge funds’ portfolios at the end of September. There were 7 hedge funds in our database with EVA holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Philip Hempleman of Ardsley Partners
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind we’re going to take a look at the fresh hedge fund action encompassing Enviva Partners, LP (NYSE:EVA).
How have hedgies been trading Enviva Partners, LP (NYSE:EVA)?
At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -43% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in EVA over the last 17 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, ValueAct Capital, managed by Jeffrey Ubben, holds the biggest position in Enviva Partners, LP (NYSE:EVA). ValueAct Capital has a $67.2 million position in the stock, comprising 0.7% of its 13F portfolio. Coming in second is Ardsley Partners, led by Philip Hempleman, holding a $23.4 million position; 5.3% of its 13F portfolio is allocated to the company. Remaining professional money managers that hold long positions include Matthew Drapkin and Steven R. Becker’s Becker Drapkin Management, Ken Griffin’s Citadel Investment Group and . In terms of the portfolio weights assigned to each position Ardsley Partners allocated the biggest weight to Enviva Partners, LP (NYSE:EVA), around 5.26% of its 13F portfolio. Becker Drapkin Management is also relatively very bullish on the stock, earmarking 2.33 percent of its 13F equity portfolio to EVA.
Since Enviva Partners, LP (NYSE:EVA) has witnessed a decline in interest from the aggregate hedge fund industry, it’s safe to say that there was a specific group of hedgies that slashed their positions entirely by the end of the third quarter. It’s worth mentioning that Renaissance Technologies dumped the biggest investment of all the hedgies followed by Insider Monkey, totaling an estimated $2.4 million in stock. Robert B. Gillam’s fund, McKinley Capital Management, also sold off its stock, about $1.4 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 3 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Enviva Partners, LP (NYSE:EVA). We will take a look at Qutoutiao Inc. (NASDAQ:QTT), Piper Jaffray Companies (NYSE:PJC), Teekay LNG Partners L.P. (NYSE:TGP), and Franks International NV (NYSE:FI). This group of stocks’ market valuations are closest to EVA’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| QTT | 5 | 12863 | -2 |
| PJC | 9 | 49369 | 0 |
| TGP | 10 | 43552 | 1 |
| FI | 11 | 22572 | -4 |
| Average | 8.75 | 32089 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $32 million. That figure was $93 million in EVA’s case. Franks International NV (NYSE:FI) is the most popular stock in this table. On the other hand Qutoutiao Inc. (NASDAQ:QTT) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Enviva Partners, LP (NYSE:EVA) is even less popular than QTT. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on EVA, though not to the same extent, as the stock returned 10.2% during the fourth quarter (through 11/30) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
