We at Insider Monkey have gone over 738 13F filings that hedge funds and famous value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st. In this article we look at what those investors think of Edison International (NYSE:EIX).
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.
Let’s take a look at the new hedge fund action encompassing Edison International (NYSE:EIX).
What does the smart money think about Edison International (NYSE:EIX)?
Heading into the second quarter of 2019, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in EIX over the last 15 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Edison International (NYSE:EIX) was held by Pzena Investment Management, which reported holding $465.4 million worth of stock at the end of March. It was followed by Renaissance Technologies with a $245.9 million position. Other investors bullish on the company included D E Shaw, Zimmer Partners, and Arrowstreet Capital.
Seeing as Edison International (NYSE:EIX) has faced falling interest from the entirety of the hedge funds we track, logic holds that there is a sect of money managers that elected to cut their positions entirely heading into Q3. It’s worth mentioning that Jos Shaver’s Electron Capital Partners dumped the biggest investment of the “upper crust” of funds followed by Insider Monkey, valued at close to $31.1 million in stock, and Josh Donfeld and David Rogers’s Castle Hook Partners was right behind this move, as the fund sold off about $24 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 1 funds heading into Q3.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Edison International (NYSE:EIX) but similarly valued. These stocks are Check Point Software Technologies Ltd. (NASDAQ:CHKP), McCormick & Company, Incorporated (NYSE:MKC), Northern Trust Corporation (NASDAQ:NTRS), and Kellogg Company (NYSE:K). This group of stocks’ market caps match EIX’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 27 hedge funds with bullish positions and the average amount invested in these stocks was $553 million. That figure was $1425 million in EIX’s case. Northern Trust Corporation (NASDAQ:NTRS) is the most popular stock in this table. On the other hand Check Point Software Technologies Ltd. (NASDAQ:CHKP) is the least popular one with only 24 bullish hedge fund positions. Edison International (NYSE:EIX) 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 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 EIX wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); EIX investors were disappointed as the stock returned -3.6% during the same time 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 so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.