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Are Investors Losing Confidence In Enbridge Energy Management, L.L.C. (EEQ)?

How do we determine whether Enbridge Energy Management, L.L.C. (NYSE:EEQ) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.

Enbridge Energy Management, L.L.C. (NYSE:EEQ) was in seven hedge funds’ portfolios at the end of September. Enbridge Energy Managementinvestors should be aware of a decrease in support from the world’s most elite money managers lately. There were ten hedge funds in our database with Enbridge Energy Management positions at the end of the previous 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 Rexnord Corp (NYSE:RXN), Ligand Pharmaceuticals Inc. (NASDAQ:LGND), and Select Income REIT (NYSE:SIR) to gather more data points.

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According to most traders, hedge funds are perceived as worthless, old financial tools of years past. While there are greater than 8,000 funds in operation today, we choose to focus on the moguls of this group, approximately 700 funds. It is estimated that this group of investors orchestrate bulk of all hedge funds’ total capital, and by monitoring their matchless equity investments, Insider Monkey has formulated numerous investment strategies that have historically beaten Mr. Market. Insider Monkey’s small-cap hedge fund strategy beat the S&P 500 index by 12 percentage points annually for a decade in their back tests.

Now, let’s take a gander at the key action surrounding Enbridge Energy Management, L.L.C. (NYSE:EEQ).

What have hedge funds been doing with Enbridge Energy Management, L.L.C. (NYSE:EEQ)?

At the end of the third quarter, a total of seven of the hedge funds tracked by Insider Monkey were bullish on this stock, a decline of 30% from one quarter earlier. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Charles Goldblum’s Hurley Capital has the number one position in Enbridge Energy Management, L.L.C. (NYSE:EEQ), worth close to $11.4 million, amounting to 12.6% of its total 13F portfolio. The second-largest stake is held by D E Shaw, with a $10.1 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Some other peers that are bullish comprise Renaissance Technologies, Russell Lucas’ Lucas Capital Management, and Matthew Hulsizer’s PEAK6 Capital Management.

Due to the fact that Enbridge Energy Management, L.L.C. (NYSE:EEQ) has witnessed a declination in interest from the smart money, it’s safe to say that there is a sect of money managers who sold off their entire stakes heading into Q4. At the top of the heap, Ken Griffin’s Citadel Investment Group sold off the largest investment of all the hedgies tracked by Insider Monkey, worth about $2.5 million in stock, while Cliff Asness of AQR Capital Management was right behind this move, as the fund sold off about $1.4 million worth of shares. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by three funds heading into Q4.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Enbridge Energy Management, L.L.C. (NYSE:EEQ) but similarly valued. These stocks are Rexnord Corp (NYSE:RXN), Ligand Pharmaceuticals Inc. (NASDAQ:LGND), Select Income REIT (NYSE:SIR), and Washington Real Estate Investment Trust (NYSE:WRE). This group of stocks’ market values are closest to Enbridge Energy Management’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RXN 17 166220 1
LGND 16 210066 -3
SIR 14 86926 -2
WRE 5 5602 1

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $117 million. That figure was $27 million in Enbridge Energy Management’s case. Rexnord Corp (NYSE:RXN) is the most popular stock in this table. On the other hand Washington Real Estate Investment Trust (NYSE:WRE) is the least popular one with only five bullish hedge fund positions. Enbridge Energy Management, L.L.C. (NYSE:EEQ) 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 Rexnord Corp might be a better candidate to consider a long position in.

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