Should You Buy FuelCell Energy, Inc. (FCEL)?

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in FuelCell Energy, Inc. (NASDAQ:FCEL)? The smart money sentiment can provide an answer to this question.

Is FuelCell Energy, Inc. (NASDAQ:FCEL) a marvelous investment today? Money managers are becoming hopeful. The number of bullish hedge fund positions went up by 1 recently. It is quite surprising, as the shares of FuelCell Energy, Inc. (NASDAQ:FCEL) were down 24.78% during the third quarter. The hedge fund behavior prompted us to find out more about the hedge funds that held positions in the company, at the end of the last 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 Nature’s Sunshine Prod. (NASDAQ:NATR), Foamix Pharmaceuticals Ltd (NASDAQ:FOMX), and Eagle Bulk Shipping Inc. (NASDAQ:EGLE) to gather more data points.

In today’s marketplace there are several tools investors put to use to appraise stocks. A couple of the best tools are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the elite hedge fund managers can outperform the S&P 500 by a solid margin (see the details here).

With all of this in mind, we’re going to take a glance at the key action surrounding FuelCell Energy, Inc. (NASDAQ:FCEL).

How have hedgies been trading FuelCell Energy, Inc. (NASDAQ:FCEL)?

At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, an increase of 14% from the second quarter. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Levin Capital Strategies, managed by John A. Levin, holds the number one position in FuelCell Energy, Inc. (NASDAQ:FCEL). Levin Capital Strategies has a $6.1 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is Ecofin Ltd, led by Bernard Lambilliotte, holding a $1.7 million position; 0.3% of its 13F portfolio is allocated to the company. Remaining peers with similar optimism consist of Israel Englander’s Millennium Management, Thomas E. Claugus’s GMT Capital, and Scott Fine and Peter Richards’ Empire Capital Management.

Consequently, some big names were leading the bulls’ herd. Empire Capital Management established the most outsized position in FuelCell Energy, Inc. (NASDAQ:FCEL). Empire Capital Management had $0.1 million invested in the company at the end of the quarter. D E Shaw also made a $0.1 million investment in the stock during the quarter.

Let’s now review hedge fund activity in other stocks similar to FuelCell Energy, Inc. (NASDAQ:FCEL). We will take a look at Nature’s Sunshine Prod. (NASDAQ:NATR), Foamix Pharmaceuticals Ltd (NASDAQ:FOMX), Eagle Bulk Shipping Inc. (NASDAQ:EGLE), and PICO Holdings Inc (NASDAQ:PICO). This group of stocks’ market caps are closest to FuelCell Energy, Inc. (NASDAQ:FCEL)’s market cap.

As you can see, these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $81 million. That figure was $9 million in FuelCell Energy, Inc. (NASDAQ:FCEL)’s case. Foamix Pharmaceuticals Ltd (NASDAQ:FOMX) is the most popular stock in this table. On the other hand, Eagle Bulk Shipping Inc. (NASDAQ:EGLE) is the least popular one with only 5 bullish hedge fund positions. FuelCell Energy, Inc. (NASDAQ:FCEL) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard, Foamix Pharmaceuticals Ltd (NASDAQ:FOMX) might be a better candidate to consider a long position.