Is Encana Corp (USA) (ECA) A Good Stock To Buy?

Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.

Is Encana Corp (USA) (NYSE:ECA) ready to rally soon? Money managers are getting more optimistic. The number of long hedge fund positions went up by 11 lately. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as DexCom, Inc. (NASDAQ:DXCM), New Oriental Education & Tech Grp (ADR) (NYSE:EDU), and Hyatt Hotels Corporation (NYSE:H) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

Keeping this in mind, let’s take a gander at the key action surrounding Encana Corp (USA) (NYSE:ECA).

What does the smart money think about Encana Corp (USA) (NYSE:ECA)?

At Q3’s end, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a surge of 42% from the second quarter of 2016. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Viking Global, managed by Andreas Halvorsen, holds the most valuable position in Encana Corp (USA) (NYSE:ECA). The fund has a $909.1 million position in the stock, comprising 3.9% of its 13F portfolio. Sitting at the No. 2 spot is Steadfast Capital Management, managed by Robert Pitts, which holds a $215.3 million position; 3.8% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors that are bullish include Israel Englander’s Millennium Management, Zach Schreiber’s Point State Capital and Paul Singer’s Elliott Management.

With a general bullishness among the heavyweights, specific money managers have been driving this bullishness. Elliott Management, managed by Paul Singer, created the most outsized position in Encana Corp (USA) (NYSE:ECA). The fund had $127 million invested in the company at the end of the quarter. Jorge Paulo Lemann’s 3G Capital also made a $62.8 million investment in the stock during the quarter. The other funds with brand new ECA positions are Anand Parekh’s Alyeska Investment Group, Rob Citrone’s Discovery Capital Management, and Steve Cohen’s Point72 Asset Management.

Let’s now review hedge fund activity in other stocks similar to Encana Corp (USA) (NYSE:ECA). We will take a look at DexCom, Inc. (NASDAQ:DXCM), New Oriental Education & Tech Grp (ADR) (NYSE:EDU), Hyatt Hotels Corporation (NYSE:H), and FactSet Research Systems Inc. (NYSE:FDS). All of these stocks’ market caps are closest to ECA’s market cap.

As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $291 million. That figure was $2.16 billion in ECA’s case. DexCom, Inc. (NASDAQ:DXCM) is the most popular stock in this table. On the other hand FactSet Research Systems Inc. (NYSE:FDS) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Encana Corp (USA) (NYSE:ECA) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: none.