Hedge Funds Aren’t Crazy About PowerSecure International, Inc. (POWR) Anymore

Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.

PowerSecure International, Inc. (NYSE:POWR) investors should pay attention to a decrease in hedge fund sentiment recently. 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 Cohu, Inc. (NASDAQ:COHU), Fifth Street Senior Floating Rate Corp (NASDAQ:FSFR), and Empresas ICA SA (ADR) (NYSE:ICA) to gather more data points.

With all of this in mind, let’s view the latest action surrounding PowerSecure International, Inc. (NYSE:POWR).

What does the smart money think about PowerSecure International, Inc. (NYSE:POWR)?

At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of -29% from the previous quarter. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Andy Redleaf’s Whitebox Advisors has the number one position in PowerSecure International, Inc. (NYSE:POWR), worth close to $4.6 million, amounting to 0.2% of its total 13F portfolio. On Whitebox Advisors’s heels is Ken Griffin of Citadel Investment Group, with a $1.9 million position; less than 0.1% of its 13F portfolio is allocated to the company. Remaining members of the smart money that are bullish contain Peter Keane’s Keane Capital Management, Jim Simons’s Renaissance Technologies and Israel Englander’s Millennium Management.

Since PowerSecure International, Inc. (NYSE:POWR) has experienced bearish sentiment from the smart money, logic holds that there exists a select few money managers that decided to sell off their full holdings in the third quarter. At the top of the heap, Richard Driehaus’s Driehaus Capital said goodbye to the largest position of all the hedgies watched by Insider Monkey, comprising an estimated $0.9 million in stock, and Josh Goldberg’s G2 Investment Partners Management was right behind this move, as the fund sold off about $0.4 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 4 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as PowerSecure International, Inc. (NYSE:POWR) but similarly valued. We will take a look at Cohu, Inc. (NASDAQ:COHU), Fifth Street Senior Floating Rate Corp (NASDAQ:FSFR), Empresas ICA SA (ADR) (NYSE:ICA), and First Connecticut Bancorp Inc (NASDAQ:FBNK). This group of stocks’ market valuations match POWR’s market valuation.

As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $12 million in POWR’s case. Cohu, Inc. (NASDAQ:COHU) is the most popular stock in this table. On the other hand Fifth Street Senior Floating Rate Corp (NASDAQ:FSFR) is the least popular one with only 4 bullish hedge fund positions. PowerSecure International, Inc. (NYSE:POWR) 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. In this regard COHU might be a better candidate to consider a long position.