With crude futures failing to rally past a key technical resistance level, shares of Sunedison Inc (NYSE:SUNE), SolarCity Corp (NASDAQ:SCTY),Solaredge Technologies Inc (NASDAQ:SEDG), CVS Health Corp (NYSE:CVS), and Amgen, Inc. (NASDAQ:AMGN) are well in the green as investors become more optimistic on each stock. Let’s find out why investors are buying.
Moreover, we will also examine relevant hedge fund sentiment toward the equities. We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular small-cap stock picks in real time since the end of August 2012. These stocks have returned 102% since then and outperformed the S&P 500 Index by around 53 percentage points (see the details here). That’s why we believe it is important to pay attention to hedge fund sentiment; we also don’t like paying huge fees.
Solar names such as Sunedison Inc (NYSE:SUNE), SolarCity Corp (NASDAQ:SCTY), and Solaredge Technologies Inc (NASDAQ:SEDG) continue to be red-hot (and up 20%, 25%, and 14% respectively in morning trading) after House Republicans agreed to extend the investment tax credit (ITC) through 2019 in exchange for the Democrats helping them lift the crude export ban. The extension of the ITC, which was originally set to end by the start of 2017, will sustain strong domestic demand for Sunedison and SolarCity’s utility scale and roof top solar projects, as well as increase their profit margins. Part of the reason investors have sold the two names is the fear that the ITC will expire. Now that the ITC will be extended, there are less reasons to be bearish and some shorts are covering their positions, leading to the rapid rise in solar stock prices.
According to our database, 73 elite funds were long Sunedison Inc (NYSE:SUNE) while 29 funds held shares of SolarCity Corp (NASDAQ:SCTY) at the end of the third quarter. Among the holders of Sunedison include elite funds such as David Einhorn’s Greenlight Capital and Larry Robbins’ Glenview Capital.
Investors are buying Solaredge, which is a provider of solar power harvesting and PV monitoring solutions, because the company will also benefit from the extension. If demand for solar plants remain strong, so will demand for Solaredge’s products. Of the around 730 funds we track, 16 funds owned $54.91 million worth of Solaredge Technologies Inc (NASDAQ:SEDG) shares and accounting for 6.10% of the float on September 30, down slightly from the 17 funds and $72.45 million respectively on June 30.
On the next page, we examine CVS Health Corp, and Amgen Inc.