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Hedge Funds Aren’t Crazy About Enphase Energy Inc (ENPH) Anymore

It was a rough third quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 7% during the quarter. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by about 14 percentage points between June 25 and October 30, as investors fled less-known quantities for safe havens. This was the case with hedge funds, who we heard were pulling money from the market amid the volatility, which included money from small-cap stocks, which they invest in at a higher rate than other investors. This action contributed to the greater decline in these stocks during the tumultuous period. We will study how this market volatility affected their sentiment towards Enphase Energy Inc (NASDAQ:ENPH) during the quarter below.

Most solar stocks took a hit this year and Enphase Energy Inc (NASDAQ:ENPH) is no exception with the stock trading 85% in the red year-to-date. In turn, this led to a decrease of the stock’s popularity among the funds we track. Enphase was in 10 hedge funds’ portfolios at the end of the third quarter of 2015, compared to 14 funds with long positions a quarter earlier. At the end of this article we will also compare ENPH to other stocks, including Bill Barrett Corporation (NYSE:BBG), Care.com Inc (NYSE:CRCM), and Cumulus Media Inc (NASDAQ:CMLS) to get a better sense of its popularity.

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In the 21st century investor’s toolkit there are numerous metrics stock traders put to use to assess stocks. Two of the less utilized metrics are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the best investment managers can trounce the broader indices by a solid margin (see the details here).

Now, let’s review the new action encompassing Enphase Energy Inc (NASDAQ:ENPH).

What does the smart money think about Enphase Energy Inc (NASDAQ:ENPH)?

At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -29% from one quarter earlier. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Dan Loeb’s Third Point has the most valuable position in Enphase Energy Inc (NASDAQ:ENPH), worth close to $23.1 million, accounting for 0.2% of its total 13F portfolio. Coming in second is Park West Asset Management, managed by Peter S. Park, which holds a $8.1 million position; 0.7% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that are bullish encompass Chuck Royce’s Royce & Associates, Paul Tudor Jones’ Tudor Investment Corp and Brad Farber’s Atika Capital.

Judging by the fact that Enphase Energy Inc (NASDAQ:ENPH) has experienced a declining sentiment from the entirety of the hedge funds we track, we can see that there is a sect of hedge funds who sold off their full holdings heading into Q4. It’s worth mentioning that Peter A. Wright’s P.A.W. CAPITAL PARTNERS cut the biggest position of all the hedgies watched by Insider Monkey, comprising close to $0.9 million in stock, and Alex Snow’s Lansdowne Partners was right behind this move, as the fund sold off about $0.6 million worth of shares. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 4 funds heading into Q4.

Let’s now review hedge fund activity in other stocks similar to Enphase Energy Inc (NASDAQ:ENPH). These stocks are Bill Barrett Corporation (NYSE:BBG), Care.com Inc (NYSE:CRCM), Cumulus Media Inc (NASDAQ:CMLS), and Assembly Biosciences Inc (NASDAQ:ASMB). All of these stocks’ market caps are similar to ENPH’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BBG 16 15779 1
CRCM 8 23432 -2
CMLS 21 27231 -2
ASMB 12 73854 -2

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $35 million. That figure was $37 million in ENPH’s case. Cumulus Media Inc (NASDAQ:CMLS) is the most popular stock in this table. On the other hand, Care.com Inc (NYSE:CRCM) is the least popular one with only 8 bullish hedge fund positions. Enphase Energy Inc (NASDAQ:ENPH) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CMLS might be a better candidate to consider a long position.

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