Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts, usually don’t make them change their opinion towards a company. This time it may be different. During the fourth quarter of 2018 we observed increased volatility and a 20% drop in stock prices. Things completely reversed in 2019 and stock indices hit record highs. Recent hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Infrastructure and Energy Alternatives, Inc. (NASDAQ:IEA) to find out whether it was one of their high conviction long-term ideas.
Hedge fund interest in Infrastructure and Energy Alternatives, Inc. (NASDAQ:IEA) 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 Potbelly Corp (NASDAQ:PBPB), Second Sight Medical Products Inc (NASDAQ:EYES), and Sachem Capital Corp. (NYSEAMERICAN:SACH) to gather more data points. Our calculations also showed that IEA 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.
In today’s marketplace there are plenty of tools shareholders can use to evaluate their stock investments. Two of the most useful tools are hedge fund and insider trading activity. We have shown that, historically, those who follow the best picks of the best fund managers can beat the market by a healthy margin (see the details here).
Howard Marks of Oaktree Capital Management
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. With all of this in mind let’s check out the fresh hedge fund action regarding Infrastructure and Energy Alternatives, Inc. (NASDAQ:IEA).
What have hedge funds been doing with Infrastructure and Energy Alternatives, Inc. (NASDAQ:IEA)?
At Q3’s end, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in IEA over the last 17 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
Among these funds, Royce & Associates held the most valuable stake in Infrastructure and Energy Alternatives, Inc. (NASDAQ:IEA), which was worth $4.1 million at the end of the third quarter. On the second spot was Hawkeye Capital which amassed $1.4 million worth of shares. Renaissance Technologies, Millennium Management, and Oaktree Capital Management 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 Hawkeye Capital allocated the biggest weight to Infrastructure and Energy Alternatives, Inc. (NASDAQ:IEA), around 1.84% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, earmarking 0.04 percent of its 13F equity portfolio to IEA.
Because Infrastructure and Energy Alternatives, Inc. (NASDAQ:IEA) has faced bearish sentiment from the smart money, it’s safe to say that there lies a certain “tier” of hedgies that elected to cut their positions entirely last quarter. It’s worth mentioning that Donald Sussman’s Paloma Partners sold off the biggest investment of all the hedgies monitored by Insider Monkey, comprising an estimated $0.1 million in stock. Philip Hempleman’s fund, Ardsley Partners, also sold off its stock, about $0.1 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks similar to Infrastructure and Energy Alternatives, Inc. (NASDAQ:IEA). These stocks are Potbelly Corp (NASDAQ:PBPB), Second Sight Medical Products Inc (NASDAQ:EYES), Sachem Capital Corp. (NYSEAMERICAN:SACH), and Taseko Mines Limited (NYSEAMERICAN:TGB). This group of stocks’ market caps match IEA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PBPB | 9 | 20532 | -2 |
| EYES | 1 | 21 | -1 |
| SACH | 3 | 2541 | 1 |
| TGB | 4 | 5045 | 0 |
| Average | 4.25 | 7035 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.25 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $7 million in IEA’s case. Potbelly Corp (NASDAQ:PBPB) is the most popular stock in this table. On the other hand Second Sight Medical Products Inc (NASDAQ:EYES) is the least popular one with only 1 bullish hedge fund positions. Infrastructure and Energy Alternatives, Inc. (NASDAQ:IEA) 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 IEA wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on IEA were disappointed as the stock returned -35.2% 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.
