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Hedge Funds Were Betting On TerraForm Power Inc (TERP) Before The Coronavirus

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. 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 fourth 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 4 years and analyze what the smart money thinks of TerraForm Power Inc (NASDAQ:TERP) based on that data.

TerraForm Power Inc (NASDAQ:TERP) has experienced an increase in support from the world’s most elite money managers recently. Our calculations also showed that TERP isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

In the eyes of most stock holders, hedge funds are viewed as slow, old investment vehicles of the past. While there are over 8000 funds trading at present, Our researchers hone in on the masters of this club, approximately 850 funds. These investment experts shepherd bulk of the smart money’s total capital, and by paying attention to their first-class picks, Insider Monkey has come up with a number of investment strategies that have historically surpassed Mr. Market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

Bernard Lambilliotte - Ecofin

Bernard Lambilliotte of Ecofin Ltd

We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a look at the recent hedge fund action regarding TerraForm Power Inc (NASDAQ:TERP).

Hedge fund activity in TerraForm Power Inc (NASDAQ:TERP)

At Q4’s end, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 15% from the previous quarter. By comparison, 8 hedge funds held shares or bullish call options in TERP a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is TERP A Good Stock To Buy?

Among these funds, Renaissance Technologies held the most valuable stake in TerraForm Power Inc (NASDAQ:TERP), which was worth $136.1 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $30.4 million worth of shares. Ecofin Ltd, D E Shaw, and Millennium Management 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 Ecofin Ltd allocated the biggest weight to TerraForm Power Inc (NASDAQ:TERP), around 6.02% of its 13F portfolio. Brasada Capital Management is also relatively very bullish on the stock, earmarking 0.36 percent of its 13F equity portfolio to TERP.

As industrywide interest jumped, some big names have jumped into TerraForm Power Inc (NASDAQ:TERP) headfirst. Millennium Management, managed by Israel Englander, assembled the largest position in TerraForm Power Inc (NASDAQ:TERP). Millennium Management had $7.9 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $1.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Bruce Kovner’s Caxton Associates LP, Steve Cohen’s Point72 Asset Management, and Benjamin A. Smith’s Laurion Capital Management.

Let’s now review hedge fund activity in other stocks similar to TerraForm Power Inc (NASDAQ:TERP). We will take a look at Strayer Education Inc (NASDAQ:STRA), Iovance Biotherapeutics, Inc. (NASDAQ:IOVA), Louisiana-Pacific Corporation (NYSE:LPX), and J&J Snack Foods Corp. (NASDAQ:JJSF). This group of stocks’ market values resemble TERP’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
STRA 13 273742 -8
IOVA 32 1333013 1
LPX 29 565644 -6
JJSF 13 121267 -7
Average 21.75 573417 -5

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $573 million. That figure was $216 million in TERP’s case. Iovance Biotherapeutics, Inc. (NASDAQ:IOVA) is the most popular stock in this table. On the other hand Strayer Education Inc (NASDAQ:STRA) is the least popular one with only 13 bullish hedge fund positions. TerraForm Power Inc (NASDAQ:TERP) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but still beat the market by 5.5 percentage points. A small number of hedge funds were also right about betting on TERP as the stock returned 1.8% during the same time period and outperformed the market by an even larger margin.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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