The worries about the election and the ongoing uncertainty about the path of interest-rate increases have been keeping investors on the sidelines. Of course, most hedge funds and other asset managers have been underperforming main stock market indices since the middle of 2015. Interestingly though, smaller-cap stocks registered their best performance relative to the large-capitalization stocks since the end of the June quarter, suggesting that this may be the best time to take a cue from their stock picks. In fact, the Russell 2000 Index gained more than 15% since the beginning of the third quarter, while the Standard and Poor’s 500 benchmark returned less than 6%. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Enbridge Inc (USA) (NYSE:ENB).
Is Enbridge Inc (USA) (NYSE:ENB) a healthy stock for your portfolio? Investors who are in the know are getting more optimistic. The number of long hedge fund positions went up by 6 recently. ENB was in 21 hedge funds’ portfolios at the end of the third quarter of 2016. There were 15 hedge funds in our database with ENB holdings at the end of the previous quarter. 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 Netflix, Inc. (NASDAQ:NFLX), Sumitomo Mitsui Financial Grp, Inc. (ADR) (NYSE:SMFG), and Halliburton Company (NYSE:HAL) to gather more data points.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
Keeping this in mind, we’re going to take a glance at the key action regarding Enbridge Inc (USA) (NYSE:ENB).
How are hedge funds trading Enbridge Inc (USA) (NYSE:ENB)?
Heading into the fourth quarter of 2016, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 40% from one quarter earlier. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Jorge Paulo Lemann’s 3G Capital has the biggest position in Enbridge Inc (USA) (NYSE:ENB), worth close to $66.3 million, accounting for 5.3% of its total 13F portfolio. Sitting at the No. 2 spot is Daniel Bubis of Tetrem Capital Management, with a $38.3 million position; 1.4% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors with similar optimism consist of Eric Sprott’s Sprott Asset Management, Jim Simons’s Renaissance Technologies and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
As industrywide interest jumped, some big names have jumped into Enbridge Inc (USA) (NYSE:ENB) headfirst. Renaissance Technologies, managed by Jim Simons, initiated the largest position in Enbridge Inc (USA) (NYSE:ENB). Renaissance Technologies had $27.7 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $25.8 million investment in the stock during the quarter. The following funds were also among the new ENB investors: Stephen J. Errico’s Locust Wood Capital Advisers, John Overdeck and David Siegel’s Two Sigma Advisors, and Richard Driehaus’s Driehaus Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Enbridge Inc (USA) (NYSE:ENB) but similarly valued. We will take a look at Netflix, Inc. (NASDAQ:NFLX), Sumitomo Mitsui Financial Grp, Inc. (ADR) (NYSE:SMFG), Halliburton Company (NYSE:HAL), and PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ:QQQ). This group of stocks’ market values are closest to ENB’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 36.25 hedge funds with bullish positions and the average amount invested in these stocks was $1741 million. That figure was $286 million in ENB’s case. Halliburton Company (NYSE:HAL) is the most popular stock in this table. On the other hand Sumitomo Mitsui Financial Grp, Inc. (ADR) (NYSE:SMFG) is the least popular one with only 10 bullish hedge fund positions. Enbridge Inc (USA) (NYSE:ENB) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard HAL might be a better candidate to consider a long position.