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Hedge Funds Getting Bullish On El Paso Electric Company (EE)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. What do these smart investors think about El Paso Electric Company (NYSE:EE)?

Is El Paso Electric Company (NYSE:EE) a healthy stock for your portfolio? The smart money is becoming more confident. The number of bullish hedge fund positions advanced by 8 recently. Our calculations also showed that EE 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). EE was in 23 hedge funds’ portfolios at the end of March. There were 15 hedge funds in our database with EE holdings at the end of the previous quarter.

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.

David Witkin Beryl Capital

David Alexander Witkin of Beryl Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to review the new hedge fund action encompassing El Paso Electric Company (NYSE:EE).

Hedge fund activity in El Paso Electric Company (NYSE:EE)

At Q1’s end, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of 53% from the previous quarter. The graph below displays the number of hedge funds with bullish position in EE over the last 18 quarters. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

The largest stake in El Paso Electric Company (NYSE:EE) was held by Alpine Associates, which reported holding $81.3 million worth of stock at the end of September. It was followed by GAMCO Investors with a $77.5 million position. Other investors bullish on the company included Renaissance Technologies, Beryl Capital Management, and Halcyon Asset Management. In terms of the portfolio weights assigned to each position Beryl Capital Management allocated the biggest weight to El Paso Electric Company (NYSE:EE), around 8.76% of its 13F portfolio. Halcyon Asset Management is also relatively very bullish on the stock, earmarking 5.41 percent of its 13F equity portfolio to EE.

Consequently, key money managers were breaking ground themselves. Melqart Asset Management, managed by Michel Massoud, established the largest position in El Paso Electric Company (NYSE:EE). Melqart Asset Management had $20.7 million invested in the company at the end of the quarter. Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners also made a $19.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Dmitry Balyasny’s Balyasny Asset Management, John Overdeck and David Siegel’s Two Sigma Advisors, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as El Paso Electric Company (NYSE:EE) but similarly valued. These stocks are Rexnord Corp (NYSE:RXN), Simpson Manufacturing Co, Inc. (NYSE:SSD), New Relic Inc (NYSE:NEWR), and WD-40 Company (NASDAQ:WDFC). This group of stocks’ market caps are closest to EE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RXN 19 213250 -6
SSD 26 197022 2
NEWR 31 809963 -13
WDFC 17 199539 0
Average 23.25 354944 -4.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $355 million. That figure was $398 million in EE’s case. New Relic Inc (NYSE:NEWR) is the most popular stock in this table. On the other hand WD-40 Company (NASDAQ:WDFC) is the least popular one with only 17 bullish hedge fund positions. El Paso Electric Company (NYSE:EE) 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. 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 13.9% in 2020 through June 10th and surpassed the market by 14.2 percentage points. Unfortunately EE wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); EE investors were disappointed as the stock returned -0.2% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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