Hedge Funds Are Selling Edison International (EIX)

Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.

Is Edison International (NYSE:EIX) a worthy investment right now? Money managers are becoming less hopeful. The number of long hedge fund bets shrunk by 6 lately. EIX was in 22 hedge funds’ portfolios at the end of September. There were 28 hedge funds in our database with EIX 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 AmerisourceBergen Corp. (NYSE:ABC), Nidec Corporation (ADR) (NYSE:NJ), and Prologis Inc (NYSE:PLD) to gather more data points.

In the 21st century investor’s toolkit there are a multitude of tools stock traders put to use to evaluate their holdings. Some of the most innovative tools are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the top picks of the elite investment managers can trounce the S&P 500 by a solid amount (see the details here).

With all of this in mind, let’s take a look at the latest action surrounding Edison International (NYSE:EIX).

What have hedge funds been doing with Edison International (NYSE:EIX)?

Heading into Q4, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a fall of 21% from the second quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Ken Griffin’s Citadel Investment Group has the largest position in Edison International (NYSE:EIX), worth close to $215.9 million, amounting to 0.2% of its total 13F portfolio. The second largest stake is held by Adage Capital Management, led by Phill Gross and Robert Atchinson, holding a $139 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Other peers with similar optimism comprise Cliff Asness’s AQR Capital Management, Richard S. Pzena’s Pzena Investment Management and Stuart J. Zimmer’s Zimmer Partners.

Due to the fact that Edison International (NYSE:EIX) has experienced a declination in interest from hedge fund managers, logic holds that there lies a certain “tier” of money managers who sold off their positions entirely heading into Q4. At the top of the heap, Jonathan Barrett and Paul Segal’s Luminus Management said goodbye to the biggest position of all the hedgies watched by Insider Monkey, comprising close to $20.7 million in stock. Israel Englander’s fund, Millennium Management, also dumped its entire holding, about $19.3 million worth of EIX shares. These transactions are important to note, as total hedge fund interest fell by 6 funds heading into Q4.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Edison International (NYSE:EIX) but similarly valued. These stocks are AmerisourceBergen Corp. (NYSE:ABC), Nidec Corporation (ADR) (NYSE:NJ), Prologis Inc (NYSE:PLD), and ARM Holdings plc (ADR) (NASDAQ:ARMH). This group of stocks’ market valuations match EIX’s market valuation.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $421 million. That figure was $707 million in EIX’s case. AmerisourceBergen Corp. (NYSE:ABC) is the most popular stock in this table, whereas Nidec Corporation (ADR) (NYSE:NJ) is the least popular one with only 4 bullish hedge fund positions. Edison International (NYSE:EIX) is not the most popular stock in this group, but hedge fund interest is still above average. Despite the fact that this is a slightly positive signal, we’d rather spend our time researching stocks that hedge funds are piling on. In this regard ABC might be a better candidate to consider a long position.