While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding ReneSola Ltd. (NYSE:SOL).
ReneSola Ltd. (NYSE:SOL) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 3 hedge funds’ portfolios at the end of March. Our calculations also showed that SOL isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). 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 MSG Networks Inc (NYSE:MSGN), Grid Dynamics Holdings, Inc. (NASDAQ:GDYN), and AudioCodes Ltd. (NASDAQ:AUDC) to gather more data points.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Michael Gelband of ExodusPoint Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let’s take a peek at the recent hedge fund action regarding ReneSola Ltd. (NYSE:SOL).
Do Hedge Funds Think SOL Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards SOL over the last 23 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in ReneSola Ltd. (NYSE:SOL) was held by Shah Capital Management, which reported holding $143.1 million worth of stock at the end of December. It was followed by Millennium Management with a $2.9 million position. The only other hedge fund that is bullish on the company was Citadel Investment Group.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Renaissance Technologies. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was ExodusPoint Capital).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as ReneSola Ltd. (NYSE:SOL) but similarly valued. These stocks are MSG Networks Inc (NYSE:MSGN), Grid Dynamics Holdings, Inc. (NASDAQ:GDYN), AudioCodes Ltd. (NASDAQ:AUDC), Viad Corp (NYSE:VVI), Altus Midstream Company (NASDAQ:ALTM), Guild Holdings Company (NYSE:GHLD), and Orla Mining Ltd. (NYSE:ORLA). This group of stocks’ market caps match SOL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MSGN | 18 | 227546 | -5 |
| GDYN | 12 | 44687 | -1 |
| AUDC | 15 | 40991 | 0 |
| VVI | 13 | 107466 | -6 |
| ALTM | 4 | 2334 | 0 |
| GHLD | 7 | 45726 | 0 |
| ORLA | 2 | 931 | -1 |
| Average | 10.1 | 67097 | -1.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.1 hedge funds with bullish positions and the average amount invested in these stocks was $67 million. That figure was $146 million in SOL’s case. MSG Networks Inc (NYSE:MSGN) is the most popular stock in this table. On the other hand Orla Mining Ltd. (NYSE:ORLA) is the least popular one with only 2 bullish hedge fund positions. ReneSola Ltd. (NYSE:SOL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SOL is 26.1. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and surpassed the market again by 3.3 percentage points. Unfortunately SOL wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); SOL investors were disappointed as the stock returned -23.4% since the end of March (through 6/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
Follow Emeren Group Ltd (NYSE:SOL)
Follow Emeren Group Ltd (NYSE:SOL)
Disclosure: None. This article was originally published at Insider Monkey.
