We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Plug Power, Inc. (NASDAQ:PLUG).
Plug Power, Inc. (NASDAQ:PLUG) has seen an increase in activity from the world’s largest hedge funds in recent months. Plug Power, Inc. (NASDAQ:PLUG) was in 25 hedge funds’ portfolios at the end of March. The all time high for this statistic was previously 21. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that PLUG isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s check out the key hedge fund action surrounding Plug Power, Inc. (NASDAQ:PLUG).
Do Hedge Funds Think PLUG Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 19% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in PLUG over the last 23 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
Among these funds, D E Shaw held the most valuable stake in Plug Power, Inc. (NASDAQ:PLUG), which was worth $433.9 million at the end of the fourth quarter. On the second spot was Citadel Investment Group which amassed $84.2 million worth of shares. Citadel Investment Group, Two Sigma Advisors, and Renaissance Technologies were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Quaero Capital allocated the biggest weight to Plug Power, Inc. (NASDAQ:PLUG), around 5.59% of its 13F portfolio. Appian Way Asset Management is also relatively very bullish on the stock, designating 0.76 percent of its 13F equity portfolio to PLUG.
Now, key money managers were breaking ground themselves. Two Sigma Advisors, managed by John Overdeck and David Siegel, created the largest position in Plug Power, Inc. (NASDAQ:PLUG). Two Sigma Advisors had $46.5 million invested in the company at the end of the quarter. Renaissance Technologies also made a $12.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Emanuel J. Friedman’s EJF Capital, Simon Sadler’s Segantii Capital, and Thomas Bailard’s Bailard Inc.
Let’s check out hedge fund activity in other stocks similar to Plug Power, Inc. (NASDAQ:PLUG). We will take a look at XP Inc. (NASDAQ:XP), HubSpot Inc (NYSE:HUBS), Fox Corporation (NASDAQ:FOX), Fox Corporation (NASDAQ:FOXA), W.W. Grainger, Inc. (NYSE:GWW), Enphase Energy Inc (NASDAQ:ENPH), and Martin Marietta Materials, Inc. (NYSE:MLM). All of these stocks’ market caps match PLUG’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 36 hedge funds with bullish positions and the average amount invested in these stocks was $995 million. That figure was $613 million in PLUG’s case. Enphase Energy Inc (NASDAQ:ENPH) is the most popular stock in this table. On the other hand XP Inc. (NASDAQ:XP) is the least popular one with only 23 bullish hedge fund positions. Plug Power, Inc. (NASDAQ:PLUG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PLUG is 42.8. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 24% in 2021 through July 9th and surpassed the market again by 6.7 percentage points. Unfortunately PLUG wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); PLUG investors were disappointed as the stock returned -18% since the end of March (through 7/9) 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 most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.