Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The last 12 months is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Enzo Biochem, Inc. (NYSE:ENZ).
Hedge fund interest in Enzo Biochem, Inc. (NYSE:ENZ) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Forum Energy Technologies Inc (NYSE:FET), Bel Fuse, Inc. (NASDAQ:BELFA), and Malvern Bancorp, Inc. (NASDAQ:MLVF) to gather more data points. Our calculations also showed that ENZ isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
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.
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds‘ buy/sell signals. Let’s check out the recent hedge fund action regarding Enzo Biochem, Inc. (NYSE:ENZ).
What have hedge funds been doing with Enzo Biochem, Inc. (NYSE:ENZ)?
At Q3’s end, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 10 hedge funds with a bullish position in ENZ a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Harbert Management was the largest shareholder of Enzo Biochem, Inc. (NYSE:ENZ), with a stake worth $20.2 million reported as of the end of September. Trailing Harbert Management was Renaissance Technologies, which amassed a stake valued at $11.9 million. Ariel Investments, Fondren Management, and D E Shaw 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 Harbert Management allocated the biggest weight to Enzo Biochem, Inc. (NYSE:ENZ), around 30.1% of its 13F portfolio. Fondren Management is also relatively very bullish on the stock, earmarking 1.06 percent of its 13F equity portfolio to ENZ.
Since Enzo Biochem, Inc. (NYSE:ENZ) has faced bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there is a sect of fund managers that decided to sell off their positions entirely in the third quarter. At the top of the heap, Jim Roumell’s Roumell Asset Management cut the largest stake of the 750 funds monitored by Insider Monkey, comprising about $4.2 million in stock. Israel Englander’s fund, Millennium Management, also cut its stock, about $0.3 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks similar to Enzo Biochem, Inc. (NYSE:ENZ). We will take a look at Forum Energy Technologies Inc (NYSE:FET), Bel Fuse, Inc. (NASDAQ:BELFA), Malvern Bancorp, Inc. (NASDAQ:MLVF), and IntriCon Corporation (NASDAQ:IIN). All of these stocks’ market caps are closest to ENZ’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FET | 16 | 19195 | -3 |
| BELFA | 4 | 5629 | 0 |
| MLVF | 4 | 32062 | 0 |
| IIN | 9 | 23467 | 2 |
| Average | 8.25 | 20088 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.25 hedge funds with bullish positions and the average amount invested in these stocks was $20 million. That figure was $39 million in ENZ’s case. Forum Energy Technologies Inc (NYSE:FET) is the most popular stock in this table. On the other hand Bel Fuse, Inc. (NASDAQ:BELFA) is the least popular one with only 4 bullish hedge fund positions. Enzo Biochem, Inc. (NYSE:ENZ) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately ENZ wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ENZ were disappointed as the stock returned -26.4% during the fourth quarter (through the end of November) 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.
Disclosure: None. This article was originally published at Insider Monkey.
