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 take a look at whether Sunrun Inc (NASDAQ:RUN) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Sunrun Inc (NASDAQ:RUN) investors should pay attention to an increase in support from the world’s most elite money managers of late. Our calculations also showed that RUN 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).
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.
Philip Hempleman of Ardsley Partners
We leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve and other Central Banks are tripping over each other to print more money. As a result, we believe gold stocks will outperform fixed income ETFs in the long-term. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences (by the way watch this video if you want to hear one of the best healthcare hedge fund manager’s coronavirus analysis). Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a glance at the key hedge fund action encompassing Sunrun Inc (NASDAQ:RUN).
How have hedgies been trading Sunrun Inc (NASDAQ:RUN)?
At Q4’s end, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 28% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards RUN over the last 18 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.
More specifically, Tiger Global Management LLC was the largest shareholder of Sunrun Inc (NASDAQ:RUN), with a stake worth $411.2 million reported as of the end of September. Trailing Tiger Global Management LLC was Ardsley Partners, which amassed a stake valued at $18.7 million. Arosa Capital Management, Ecofin Ltd, and Two Sigma Advisors 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 Ardsley Partners allocated the biggest weight to Sunrun Inc (NASDAQ:RUN), around 2.98% of its 13F portfolio. Ecofin Ltd is also relatively very bullish on the stock, dishing out 2.91 percent of its 13F equity portfolio to RUN.
Consequently, some big names were breaking ground themselves. Ecofin Ltd, managed by Bernard Lambilliotte, initiated the most outsized position in Sunrun Inc (NASDAQ:RUN). Ecofin Ltd had $6.1 million invested in the company at the end of the quarter. John Hurley’s Cavalry Asset Management also initiated a $3.5 million position during the quarter. The other funds with brand new RUN positions are Sander Gerber’s Hudson Bay Capital Management, Bruce Kovner’s Caxton Associates LP, and Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management.
Let’s go over hedge fund activity in other stocks similar to Sunrun Inc (NASDAQ:RUN). These stocks are Eagle Bancorp, Inc. (NASDAQ:EGBN), Gibraltar Industries Inc (NASDAQ:ROCK), Esperion Therapeutics (NASDAQ:ESPR), and Provident Financial Services, Inc. (NYSE:PFS). This group of stocks’ market caps are closest to RUN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EGBN | 18 | 36520 | 1 |
| ROCK | 23 | 147934 | 4 |
| ESPR | 15 | 210894 | -1 |
| PFS | 16 | 60229 | 4 |
| Average | 18 | 113894 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $114 million. That figure was $470 million in RUN’s case. Gibraltar Industries Inc (NASDAQ:ROCK) is the most popular stock in this table. On the other hand Esperion Therapeutics (NASDAQ:ESPR) is the least popular one with only 15 bullish hedge fund positions. Sunrun Inc (NASDAQ:RUN) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately RUN wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on RUN were disappointed as the stock returned -27.7% 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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.
