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Did Hedge Funds Make The Right Call On Enbridge Inc (ENB) ?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Enbridge Inc (NYSE:ENB) and determine whether hedge funds had an edge regarding this stock.

Enbridge Inc (NYSE:ENB) was in 25 hedge funds’ portfolios at the end of the first quarter of 2020. ENB has seen an increase in enthusiasm from smart money lately. There were 21 hedge funds in our database with ENB holdings at the end of the previous quarter. Our calculations also showed that ENB isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

To most stock holders, hedge funds are assumed to be unimportant, outdated investment vehicles of the past. While there are greater than 8000 funds in operation at present, Our experts hone in on the masters of this group, around 850 funds. These money managers shepherd the lion’s share of the smart money’s total asset base, and by shadowing their highest performing investments, Insider Monkey has brought to light a few investment strategies that have historically beaten the market. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. Now we’re going to check out the key hedge fund action surrounding Enbridge Inc (NYSE:ENB).

How have hedgies been trading Enbridge Inc (NYSE:ENB)?

Heading into the second quarter of 2020, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from the previous quarter. On the other hand, there were a total of 20 hedge funds with a bullish position in ENB a year ago. So, let’s review 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, Renaissance Technologies has the biggest position in Enbridge Inc (NYSE:ENB), worth close to $152.8 million, amounting to 0.1% of its total 13F portfolio. Coming in second is Citadel Investment Group, managed by Ken Griffin, which holds a $51.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that are bullish encompass D. E. Shaw’s D E Shaw, Noam Gottesman’s GLG Partners and Gordon W Malin’s Mountain Road Advisors. In terms of the portfolio weights assigned to each position Heronetta Management allocated the biggest weight to Enbridge Inc (NYSE:ENB), around 7.01% of its 13F portfolio. Mountain Road Advisors is also relatively very bullish on the stock, earmarking 5.76 percent of its 13F equity portfolio to ENB.

Consequently, key money managers have been driving this bullishness. GLG Partners, managed by Noam Gottesman, created the most valuable position in Enbridge Inc (NYSE:ENB). GLG Partners had $17.8 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also made a $9.2 million investment in the stock during the quarter. The following funds were also among the new ENB investors: John Overdeck and David Siegel’s Two Sigma Advisors, Matthew Hulsizer’s PEAK6 Capital Management, and Israel Englander’s Millennium Management.

Let’s also examine hedge fund activity in other stocks similar to Enbridge Inc (NYSE:ENB). We will take a look at Allergan plc (NYSE:AGN), Intuitive Surgical, Inc. (NASDAQ:ISRG), The TJX Companies, Inc. (NYSE:TJX), and Anthem Inc (NYSE:ANTM). This group of stocks’ market caps resemble ENB’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AGN 95 12598171 9
ISRG 50 964310 -1
TJX 69 1966466 12
ANTM 70 3549888 -1
Average 71 4769709 4.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 71 hedge funds with bullish positions and the average amount invested in these stocks was $4770 million. That figure was $298 million in ENB’s case. Allergan plc (NYSE:AGN) is the most popular stock in this table. On the other hand Intuitive Surgical, Inc. (NASDAQ:ISRG) is the least popular one with only 50 bullish hedge fund positions. Compared to these stocks Enbridge Inc (NYSE:ENB) is even less popular than ISRG. Hedge funds dodged a bullet by taking a bearish stance towards ENB. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but managed to beat the market by 15.5 percentage points. Unfortunately ENB wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); ENB investors were disappointed as the stock returned 6.5% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.

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Disclosure: None. This article was originally published at Insider Monkey.