Did The Smart Money Play Enphase Energy Inc (ENPH) Correctly?

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 Enphase Energy Inc (NASDAQ:ENPH) and determine whether hedge funds had an edge regarding this stock.

Enphase Energy Inc (NASDAQ:ENPH) was in 52 hedge funds’ portfolios at the end of September. The all time high for this statistic was previously 49. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. ENPH has seen an increase in activity from the world’s largest hedge funds recently. There were 44 hedge funds in our database with ENPH positions at the end of the second quarter. Our calculations also showed that ENPH isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s take a look at the recent hedge fund action regarding Enphase Energy Inc (NASDAQ:ENPH).

Do Hedge Funds Think ENPH Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2021, a total of 52 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from the second quarter of 2021. By comparison, 42 hedge funds held shares or bullish call options in ENPH a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Ken Griffin’s Citadel Investment Group has the most valuable call position in Enphase Energy Inc (NASDAQ:ENPH), worth close to $210.1 million, corresponding to less than 0.1%% of its total 13F portfolio. On Citadel Investment Group’s heels is Greenvale Capital, led by Bruce Emery, holding a $85.5 million position; 10.3% of its 13F portfolio is allocated to the company. Some other members of the smart money that hold long positions encompass Daniel Patrick Gibson’s Sylebra Capital Management, Israel Englander’s Millennium Management and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Greenvale Capital allocated the biggest weight to Enphase Energy Inc (NASDAQ:ENPH), around 10.31% of its 13F portfolio. Quaero Capital is also relatively very bullish on the stock, dishing out 5.2 percent of its 13F equity portfolio to ENPH.

As one would reasonably expect, some big names were breaking ground themselves. Holocene Advisors, managed by Brandon Haley, established the most valuable position in Enphase Energy Inc (NASDAQ:ENPH). Holocene Advisors had $32.8 million invested in the company at the end of the quarter. Louis Bacon’s Moore Global Investments also made a $16.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Steve Cohen’s Point72 Asset Management, Jinghua Yan’s TwinBeech Capital, and Greg Eisner’s Engineers Gate Manager.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Enphase Energy Inc (NASDAQ:ENPH) but similarly valued. We will take a look at Dynatrace, Inc. (NYSE:DT), NetApp Inc. (NASDAQ:NTAP), Teledyne Technologies Incorporated (NYSE:TDY), Citizens Financial Group Inc (NYSE:CFG), Entergy Corporation (NYSE:ETR), RingCentral Inc (NYSE:RNG), and Darden Restaurants, Inc. (NYSE:DRI). This group of stocks’ market values resemble ENPH’s market value.

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As you can see these stocks had an average of 35 hedge funds with bullish positions and the average amount invested in these stocks was $1236 million. That figure was $638 million in ENPH’s case. RingCentral Inc (NYSE:RNG) is the most popular stock in this table. On the other hand Darden Restaurants, Inc. (NYSE:DRI) is the least popular one with only 25 bullish hedge fund positions. Compared to these stocks Enphase Energy Inc (NASDAQ:ENPH) is more popular among hedge funds. Our overall hedge fund sentiment score for ENPH is 90. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and still beat the market by 3.6 percentage points. Unfortunately, ENPH wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ENPH were disappointed as the stock returned -6.3% since the end of the third quarter (through 1/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as all of these stocks already outperformed the market since 2019.

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