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Hedge Funds Are Selling Enerplus Corp (ERF)

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Enerplus Corp (NYSE:ERF) based on that data.

Enerplus Corp (NYSE:ERF) was in 15 hedge funds’ portfolios at the end of March. ERF investors should pay attention to a decrease in support from the world’s most elite money managers recently. There were 20 hedge funds in our database with ERF holdings at the end of the previous quarter. Our calculations also showed that ERF isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Jonathan Barrett Luminus Management

Jonathan Barrett of Luminus Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to review the latest hedge fund action surrounding Enerplus Corp (NYSE:ERF).

Hedge fund activity in Enerplus Corp (NYSE:ERF)

At the end of the first quarter, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ERF over the last 18 quarters. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

Among these funds, Encompass Capital Advisors held the most valuable stake in Enerplus Corp (NYSE:ERF), which was worth $23.8 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $5.5 million worth of shares. Renaissance Technologies, Point72 Asset Management, and Two Sigma Advisors 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 Encompass Capital Advisors allocated the biggest weight to Enerplus Corp (NYSE:ERF), around 2.55% of its 13F portfolio. Elkhorn Partners is also relatively very bullish on the stock, setting aside 0.08 percent of its 13F equity portfolio to ERF.

Seeing as Enerplus Corp (NYSE:ERF) has witnessed bearish sentiment from the entirety of the hedge funds we track, we can see that there lies a certain “tier” of money managers that decided to sell off their entire stakes in the first quarter. Intriguingly, Amy Minella’s Cardinal Capital cut the biggest investment of the 750 funds watched by Insider Monkey, comprising an estimated $24.8 million in stock. Vince Maddi and Shawn Brennan’s fund, SIR Capital Management, also sold off its stock, about $3 million worth. These transactions are important to note, as total hedge fund interest dropped by 5 funds in the first quarter.

Let’s go over hedge fund activity in other stocks similar to Enerplus Corp (NYSE:ERF). These stocks are Citizens, Inc. (NYSE:CIA), Comtech Telecommunications Corp. (NASDAQ:CMTL), Progenics Pharmaceuticals, Inc. (NASDAQ:PGNX), and Farmers National Banc Corp (NASDAQ:FMNB). All of these stocks’ market caps are closest to ERF’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CIA 3 3254 1
CMTL 18 50189 1
PGNX 12 43464 2
FMNB 9 14554 0
Average 10.5 27865 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $28 million. That figure was $46 million in ERF’s case. Comtech Telecommunications Corp. (NASDAQ:CMTL) is the most popular stock in this table. On the other hand Citizens, Inc. (NYSE:CIA) is the least popular one with only 3 bullish hedge fund positions. Enerplus Corp (NYSE:ERF) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th but still beat the market by 16.8 percentage points. Hedge funds were also right about betting on ERF as the stock returned 84.1% in Q2 (through June 25th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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