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Should You Buy Energy Focus Inc (EFOI)?

Does Energy Focus Inc (NASDAQ:EFOI) represent a good buying opportunity at the moment? Let’s briefly check the hedge fund sentiment towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but their stock picks have been generating superior risk-adjusted returns on average over the years.

Energy Focus investors should pay attention to an increase in enthusiasm from smart money lately and even though only 6 hedge funds reported positions in the company as of the end of the third quarter of 2015, there was just one fund in our database with a stake in EFOI at the end of the previous quarter.

However, 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 TRACON Pharmaceuticals Inc (NASDAQ:TCON), Xenon Pharmaceuticals Inc (NASDAQ:XENE), and Hugoton Royalty Trust (NYSE:HGT) to gather more data points.

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In the 21st century investor’s toolkit there are numerous indicators shareholders have at their disposal to assess stocks. Some of the most innovative indicators are hedge fund and insider trading moves. We have shown that, historically, those who follow the top picks of the elite money managers can trounce their index-focused peers by a significant amount (see the details here).

With all of this in mind, let’s take a gander at the fresh action surrounding Energy Focus Inc (NASDAQ:EFOI).

Hedge fund activity in Energy Focus Inc (NASDAQ:EFOI)

As stated earlier, heading into Q4, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 500% from the second quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Israel Englander’s Millennium Management has the number one position in Energy Focus Inc (NASDAQ:EFOI), worth close to $0.9 million, accounting for less than 0.1%% of its total 13F portfolio. Coming in second is Highbridge Capital Management, managed by Glenn Russell Dubin, which holds a $0.4 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other professional money managers that are bullish encompass Jim Simons’ Renaissance Technologies, Josh Goldberg’s G2 Investment Partners Management and Ken Griffin’s Citadel Investment Group. All of these funds initiated their positions in the company between July and September.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Energy Focus Inc (NASDAQ:EFOI) but similarly valued. We will take a look at TRACON Pharmaceuticals Inc (NASDAQ:TCON), Xenon Pharmaceuticals Inc (NASDAQ:XENE), Hugoton Royalty Trust (NYSE:HGT), and Hardinge Inc. (NASDAQ:HDNG). This group of stocks’ market caps are closest to EFOI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TCON 5 12671 0
XENE 8 21808 -1
HGT 5 713 -2
HDNG 7 20787 2

As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was just $2 million in EFOI’s case. Xenon Pharmaceuticals Inc (NASDAQ:XENE) is the most popular stock in this table. On the other hand TRACON Pharmaceuticals Inc (NASDAQ:TCON) is the least popular one with only 5 bullish hedge fund positions. Energy Focus Inc (NASDAQ:EFOI) is not the least popular stock in this group, but hedge fund interest is close to the average.

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