We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind let’s see whether Enbridge Inc (NYSE:ENB) represents a good buying opportunity at the moment. Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.
Is Enbridge Inc (NYSE:ENB) a buy, sell, or hold? Hedge funds are betting on the stock. The number of bullish hedge fund positions moved up by 1 lately. Our calculations also showed that ENB isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). ENB was in 21 hedge funds’ portfolios at the end of December. There were 20 hedge funds in our database with ENB positions at the end of the previous quarter.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Matthew Hulsizer of PEAK6 Capital
Keeping this in mind we’re going to review the fresh hedge fund action encompassing Enbridge Inc (NYSE:ENB).
Hedge fund activity in Enbridge Inc (NYSE:ENB)
Heading into the first quarter of 2020, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the previous quarter. By comparison, 18 hedge funds held shares or bullish call options in ENB a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Enbridge Inc (NYSE:ENB), with a stake worth $179.8 million reported as of the end of September. Trailing Renaissance Technologies was D E Shaw, which amassed a stake valued at $42.1 million. Galibier Capital Management, Mountain Road Advisors, and PEAK6 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 Galibier Capital Management allocated the biggest weight to Enbridge Inc (NYSE:ENB), around 6.6% of its 13F portfolio. Mountain Road Advisors is also relatively very bullish on the stock, setting aside 5.68 percent of its 13F equity portfolio to ENB.
Now, key money managers were breaking ground themselves. Mountain Road Advisors, managed by Gordon W Malin, established the largest position in Enbridge Inc (NYSE:ENB). Mountain Road Advisors had $15 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $1.9 million investment in the stock during the quarter. The following funds were also among the new ENB investors: Donald Sussman’s Paloma Partners, John Nevin Jr’s Ayrshire Capital Management, and Ronald Hua’s Qtron Investments.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Enbridge Inc (NYSE:ENB) but similarly valued. We will take a look at Mondelez International Inc (NASDAQ:MDLZ), Fiserv, Inc. (NASDAQ:FISV), Stryker Corporation (NYSE:SYK), and BlackRock, Inc. (NYSE:BLK). All of these stocks’ market caps resemble ENB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MDLZ | 50 | 2343152 | -6 |
| FISV | 78 | 4174064 | -2 |
| SYK | 43 | 833267 | 7 |
| BLK | 43 | 916922 | -4 |
| Average | 53.5 | 2066851 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 53.5 hedge funds with bullish positions and the average amount invested in these stocks was $2067 million. That figure was $286 million in ENB’s case. Fiserv, Inc. (NASDAQ:FISV) is the most popular stock in this table. On the other hand Stryker Corporation (NYSE:SYK) is the least popular one with only 43 bullish hedge fund positions. Compared to these stocks Enbridge Inc (NYSE:ENB) is even less popular than SYK. Hedge funds dodged a bullet by taking a bearish stance towards ENB. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.0% in 2020 through May 1st but managed to beat the market by 12.9 percentage points. Unfortunately ENB wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); ENB investors were disappointed as the stock returned -23.5% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
