Hedge Funds Are Dumping Sunnova Energy International Inc. (NOVA)

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Sunnova Energy International Inc. (NYSE:NOVA) in this article.

Sunnova Energy International Inc. (NYSE:NOVA) has seen a decrease in enthusiasm from smart money lately. Sunnova Energy International Inc. (NYSE:NOVA) was in 26 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 32. Our calculations also showed that NOVA isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Glen Kacher of Light Street Capital

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. Now we’re going to take a gander at the key hedge fund action encompassing Sunnova Energy International Inc. (NYSE:NOVA).

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

At the end of the first quarter, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -19% from one quarter earlier. By comparison, 9 hedge funds held shares or bullish call options in NOVA a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Sunnova Energy International Inc. (NYSE:NOVA) was held by Electron Capital Partners, which reported holding $56.1 million worth of stock at the end of December. It was followed by Sylebra Capital Management with a $46.1 million position. Other investors bullish on the company included Light Street Capital, Point72 Asset Management, and Encompass Capital Advisors. In terms of the portfolio weights assigned to each position Electron Capital Partners allocated the biggest weight to Sunnova Energy International Inc. (NYSE:NOVA), around 3.88% of its 13F portfolio. Encompass Capital Advisors is also relatively very bullish on the stock, designating 2.39 percent of its 13F equity portfolio to NOVA.

Seeing as Sunnova Energy International Inc. (NYSE:NOVA) has witnessed declining sentiment from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of fund managers who sold off their positions entirely by the end of the first quarter. It’s worth mentioning that Louis Bacon’s Moore Global Investments said goodbye to the largest investment of all the hedgies monitored by Insider Monkey, valued at close to $56.3 million in stock, and Alec Litowitz and Ross Laser’s Magnetar Capital was right behind this move, as the fund cut about $40.7 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 6 funds by the end of the first quarter.

Let’s now review hedge fund activity in other stocks similar to Sunnova Energy International Inc. (NYSE:NOVA). These stocks are Ormat Technologies, Inc. (NYSE:ORA), Everbridge, Inc. (NASDAQ:EVBG), Navistar International Corp (NYSE:NAV), Workiva Inc (NYSE:WK), SAGE Therapeutics Inc (NASDAQ:SAGE), 21Vianet Group Inc (NASDAQ:VNET), and ChampionX Corporation (NASDAQ:CHX). All of these stocks’ market caps are closest to NOVA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ORA 17 251963 1
EVBG 49 1083099 13
NAV 21 2077934 -8
WK 22 438709 3
SAGE 27 401401 -2
VNET 30 581185 -3
CHX 28 589002 -2
Average 27.7 774756 0.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.7 hedge funds with bullish positions and the average amount invested in these stocks was $775 million. That figure was $328 million in NOVA’s case. Everbridge, Inc. (NASDAQ:EVBG) is the most popular stock in this table. On the other hand Ormat Technologies, Inc. (NYSE:ORA) is the least popular one with only 17 bullish hedge fund positions. Sunnova Energy International Inc. (NYSE:NOVA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NOVA is 37.4. 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 NOVA wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); NOVA investors were disappointed as the stock returned -10.8% 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.