Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of Enbridge Inc (NYSE:ENB) based on that data.
Is Enbridge Inc (NYSE:ENB) ready to rally soon? The smart money was becoming less hopeful. The number of bullish hedge fund bets were trimmed by 3 in recent months. Enbridge Inc (NYSE:ENB) was in 19 hedge funds’ portfolios at the end of June. The all time high for this statistic is 28. Our calculations also showed that ENB isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 79 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.
Ian Wace of Marshall Wace
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, plant based food market is expected to explode 100-fold by 2050, so we are checking out this stock pitch. We go through lists like the 10 best growth stocks to buy 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. With all of this in mind let’s view the latest hedge fund action encompassing Enbridge Inc (NYSE:ENB).
Do Hedge Funds Think ENB Is A Good Stock To Buy Now?
At second quarter’s end, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in ENB over the last 24 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
The largest stake in Enbridge Inc (NYSE:ENB) was held by Galibier Capital Management, which reported holding $30.9 million worth of stock at the end of June. It was followed by Marshall Wace LLP with a $27.8 million position. Other investors bullish on the company included Citadel Investment Group, Schonfeld Strategic Advisors, and Point72 Asset Management. In terms of the portfolio weights assigned to each position Heronetta Management allocated the biggest weight to Enbridge Inc (NYSE:ENB), around 6.3% of its 13F portfolio. Yaupon Capital is also relatively very bullish on the stock, earmarking 4.43 percent of its 13F equity portfolio to ENB.
Since Enbridge Inc (NYSE:ENB) has witnessed bearish sentiment from the smart money, we can see that there lies a certain “tier” of money managers that decided to sell off their positions entirely in the second quarter. Intriguingly, Renaissance Technologies cut the largest investment of the 750 funds watched by Insider Monkey, totaling about $8.7 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund sold off about $4.8 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 3 funds in the second quarter.
Let’s go over hedge fund activity in other stocks similar to Enbridge Inc (NYSE:ENB). We will take a look at The PNC Financial Services Group Inc. (NYSE:PNC), Brookfield Asset Management Inc. (NYSE:BAM), Petroleo Brasileiro S.A. – Petrobras (NYSE:PBR), FedEx Corporation (NYSE:FDX), The Bank of Nova Scotia (NYSE:BNS), Mercadolibre Inc (NASDAQ:MELI), and NetEase, Inc (NASDAQ:NTES). This group of stocks’ market values resemble ENB’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PNC | 38 | 727612 | -1 |
| BAM | 34 | 1657528 | 0 |
| PBR | 25 | 2799044 | -2 |
| FDX | 61 | 2170185 | -2 |
| BNS | 14 | 223095 | -5 |
| MELI | 74 | 4024188 | 5 |
| NTES | 43 | 3720524 | 11 |
| Average | 41.3 | 2188882 | 0.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 41.3 hedge funds with bullish positions and the average amount invested in these stocks was $2189 million. That figure was $166 million in ENB’s case. Mercadolibre Inc (NASDAQ:MELI) is the most popular stock in this table. On the other hand The Bank of Nova Scotia (NYSE:BNS) is the least popular one with only 14 bullish hedge fund positions. Enbridge Inc (NYSE:ENB) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ENB is 26.5. 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. 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 October 22nd and still beat the market by 1.6 percentage points. A small number of hedge funds were also right about betting on ENB as the stock returned 8.7% since the end of the second quarter (through 10/22) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
