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Hedge Funds Have Never Been This Bullish On EnCana Corporation (ECA)

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

EnCana Corporation (NYSE:ECA) investors should be aware of an increase in hedge fund sentiment recently. Our calculations also showed that eca isn’t among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Dmitry Balyasny

Let’s review the latest hedge fund action regarding EnCana Corporation (NYSE:ECA).

What have hedge funds been doing with EnCana Corporation (NYSE:ECA)?

At the end of the first quarter, a total of 44 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from the fourth quarter of 2018. By comparison, 26 hedge funds held shares or bullish call options in ECA a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with ECA Positions

Of the funds tracked by Insider Monkey, Point72 Asset Management, managed by Steve Cohen, holds the biggest position in EnCana Corporation (NYSE:ECA). Point72 Asset Management has a $259.1 million position in the stock, comprising 1.2% of its 13F portfolio. Sitting at the No. 2 spot is Israel Englander of Millennium Management, with a $159.5 million position; 0.2% of its 13F portfolio is allocated to the company. Remaining peers that are bullish comprise John Overdeck and David Siegel’s Two Sigma Advisors, Andy Redleaf’s Whitebox Advisors and Dmitry Balyasny’s Balyasny Asset Management.

Consequently, key money managers have been driving this bullishness. Alyeska Investment Group, managed by Anand Parekh, assembled the most valuable position in EnCana Corporation (NYSE:ECA). Alyeska Investment Group had $32.2 million invested in the company at the end of the quarter. William Harnisch’s Peconic Partners LLC also made a $21.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors, Wayne Cooperman’s Cobalt Capital Management, and Joel Greenblatt’s Gotham Asset Management.

Let’s check out hedge fund activity in other stocks similar to EnCana Corporation (NYSE:ECA). We will take a look at Steris Plc (NYSE:STE), Pinnacle West Capital Corporation (NYSE:PNW), DexCom, Inc. (NASDAQ:DXCM), and Jack Henry & Associates, Inc. (NASDAQ:JKHY). This group of stocks’ market values are closest to ECA’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
STE 21 319546 -1
PNW 24 720582 -2
DXCM 33 804444 2
JKHY 17 179416 -4
Average 23.75 505997 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.75 hedge funds with bullish positions and the average amount invested in these stocks was $506 million. That figure was $1002 million in ECA’s case. DexCom, Inc. (NASDAQ:DXCM) is the most popular stock in this table. On the other hand Jack Henry & Associates, Inc. (NASDAQ:JKHY) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks EnCana Corporation (NYSE:ECA) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately ECA wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ECA were disappointed as the stock returned -23.8% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market in Q2.

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

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