Is Empire District Electric Co (EDE) A Good Stock To Buy?

We have been waiting for this for a year and finally the third quarter ended up showing a nice bump in the performance of small-cap stocks. Both the S&P 500 and Russell 2000 were up since the end of the second quarter, but small-cap stocks outperformed the large-cap stocks by double digits. This is important for hedge funds, which are big supporters of small-cap stocks, because their investors started pulling some of their capital out due to poor recent performance. It is very likely that equity hedge funds will deliver better risk adjusted returns in the second half of this year. In this article we are going to look at how this recent market trend affected the sentiment of hedge funds towards Empire District Electric Co (NYSE:EDE), and what that likely means for the prospects of the company and its stock.

Is Empire District Electric Co (NYSE:EDE) a buy right now? Money managers are actually becoming less hopeful. The number of long hedge fund bets that are revealed through 13F filings retreated by 3 lately. EDE was in 7 hedge funds’ portfolios at the end of September. There were 10 hedge funds in our database with EDE holdings at the end of June. 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 Banner Corporation (NASDAQ:BANR), MGM Growth Properties LLC(NYSE:MGP), and Smith & Wesson Holding Corporation (NASDAQ:SWHC) to gather more data points.

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Hedge fund activity in Empire District Electric Co (NYSE:EDE)

At Q3’s end, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 30% drop from the second quarter of 2016. The graph below displays the number of hedge funds with bullish positions in EDE over the last 5 quarters, which has slumped heavily in 2016. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Magnetar Capital, led by Alec Litowitz and Ross Laser, holds the number one position in Empire District Electric Co (NYSE:EDE). Magnetar Capital has a $62.6 million position in the stock, comprising 1% of its 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, one of the largest hedge funds in the world, holding a $40.5 million position. Remaining peers with similar optimism consist of Mario Gabelli’s GAMCO Investors, Matthew Tewksbury’s Stevens Capital Management, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds, which is based on the performance of their 13F long positions in non-micro-cap stocks.

Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that sold off their entire stakes in the stock during the third quarter. Intriguingly, John Orrico’s Water Island Capital sold off the biggest position of all the investors tracked by Insider Monkey, worth close to $9.8 million in stock, and John Overdeck and David Siegel’s Two Sigma Advisors was right behind this move, as the fund dumped about $0.9 million worth of shares.

Let’s also examine hedge fund activity in other stocks similar to Empire District Electric Co (NYSE:EDE). We will take a look at Banner Corporation (NASDAQ:BANR), MGM Growth Properties LLC(NYSE:MGP), Smith & Wesson Holding Corporation (NASDAQ:SWHC), and TASER International, Inc. (NASDAQ:TASR). This group of stocks’ market values are similar to EDE’s market value.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $192 million. That figure was $116 million in EDE’s case. MGM Growth Properties LLC(NYSE:MGP) is the most popular stock in this table. On the other hand TASER International, Inc. (NASDAQ:TASR) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks  Empire District Electric Co (NYSE:EDE) is even less popular than TASR. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock.

Disclosure: None