In this article we are going to use hedge fund sentiment as a tool and determine whether Just Energy Group, Inc. (NYSE:JE) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Hedge fund interest in Just Energy Group, Inc. (NYSE:JE) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that JE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare JE to other stocks including Cleveland BioLabs, Inc. (NASDAQ:CBLI), Gyrodyne, LLC (NASDAQ:GYRO), and Capitala Finance Corp (NASDAQ:CPTA) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 66 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.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website.Keeping this in mind let’s take a gander at the latest hedge fund action encompassing Just Energy Group, Inc. (NYSE:JE).
Hedge fund activity in Just Energy Group, Inc. (NYSE:JE)
At Q3’s end, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards JE over the last 21 quarters. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
More specifically, Ardsley Partners was the largest shareholder of Just Energy Group, Inc. (NYSE:JE), with a stake worth $0.2 million reported as of the end of September. Trailing Ardsley Partners was Citadel Investment Group, which amassed a stake valued at $0.2 million. Two Sigma Advisors was 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 Ardsley Partners allocated the biggest weight to Just Energy Group, Inc. (NYSE:JE), around 0.04% of its 13F portfolio. Two Sigma Advisors is also relatively very bullish on the stock, designating 0.0002 percent of its 13F equity portfolio to JE.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Renaissance Technologies. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Citadel Investment Group).
Let’s check out hedge fund activity in other stocks similar to Just Energy Group, Inc. (NYSE:JE). These stocks are Cleveland BioLabs, Inc. (NASDAQ:CBLI), Gyrodyne, LLC (NASDAQ:GYRO), Capitala Finance Corp (NASDAQ:CPTA), Biolase Inc (NASDAQ:BIOL), WVS Financial Corp. (NASDAQ:WVFC), MIND Technology, Inc. (NASDAQ:MIND), and Brickell Biotech, Inc. (NASDAQ:BBI). This group of stocks’ market caps resemble JE’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 2.4 hedge funds with bullish positions and the average amount invested in these stocks was $2 million. That figure was $1 million in JE’s case. Biolase Inc (NASDAQ:BIOL) is the most popular stock in this table. On the other hand Gyrodyne, LLC (NASDAQ:GYRO) is the least popular one with only 1 bullish hedge fund positions. Just Energy Group, Inc. (NYSE:JE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for JE is 45.3. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 percentage points. These stocks gained 28.1% in 2020 through November 23rd and beat the market again by 15.4 percentage points. Unfortunately JE wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on JE were disappointed as the stock returned -3.8% since the end of September (through 11/23) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.